Drivers could see the price of petrol and diesel fall by more than a £5 a tank because of an oil price war and the impact of coronavirus.
Motoring group the RAC is expecting big cuts on the forecourt as fuel returns to its lowest price in almost five years. Last week, the price of oil fell from $50 to $30, thanks largely to the breakout of a Russia-Saudi oil price war.
‘If retailers reduce pump prices to accurately reflect what they have been paying for petrol and diesel on the wholesale market for the last week, around 10p-per-litre should come off the price of each fuel,’ said an RAC spokesman.
This would mean average unleaded prices drop to around 112p and diesel to 115p-per-litre – prices last seen in late-2016.
It currently costs an average of £67 to fill a 55-litre car with unleaded petrol, and £68.50 with diesel. If prices fall by as much as the RAC predicts, this would save drivers around £5.40 per tank of petrol and £5.30 per tank of diesel.
Fuel stations at supermarkets have raced to pass on the savings to drivers – but this is driven more by fierce competition for the grocery trade. Asda was the first of the major supermarkets to slash prices for unleaded and diesel, but Tesco, Sainsburys and Morrisons expected to follow suit this week.
While there are no official figures available, anecdotal evidence suggests demand for fuel is falling as more and more people reduce travel and work from home. Estimates put fuel sales down by as much as 15 per cent over the past week.
Brian Madderson, chairman of the Petrol Retailers Association, says his contacts in Italy – which is in a more advanced stage of the COVID 19 outbreak – have reported a drop in fuel volumes by as much as 60 per cent.
Madderson said, ‘We expect demand to continue to fall, but prices won’t follow suit as retailers strive to protect their margins and make their business model as sustainable as possible.
‘However, we do expect supermarkets to reduce prices as part of their own internal price war to win grocery trade.’
And while consumers have been panic buying toilet roll and hand sanitizer, there’s been no such run on drivers rushing to fill up their car.
Madderson added, ‘Problems could arise if our members have to send staff home, either because they are vulnerable or are showing signs of infection, which could lead some filling stations to close
‘However, this might not cause the problems you would normally expect in a crisis as demand for fuel will be lower.’
Unlike many things, fuel has no shelf life. If demand continues to fall retailers will move into the contagion phase. This is where production outstrips demand and traders hire containers to store fuel in until demand returns.