With markets opening this week to the biggest crash in oil price since the 1991 Gulf War, motorists would have been rubbing their hands together with the prospect of paying significantly less the next time they brimmed their cars.
However, so far we’ve only seen a measly cut of 2p off a litre of unleaded and diesel triggered by Asda, which is hardly the plunge drivers would have expected to see given the oil nosedive.
With Big Four rivals Morrisons and Tesco matching these cuts rather than tapping into their widening profits to gazump it, it’s proof that retailers are unwilling to wage a real war with fuel prices.
When does the real fuel price war start? Experts predict it will take two weeks of retailer profiteering before motorists feel the benefits of the recent oil price plunge
Meanwhile, bigger non-supermarket retailers will pass on cuts even more slowly – and they won’t be as deep either.
Drivers need to sit tight, if they can. Much cheaper fuel is on the way – you’ll just need to wait a fortnight to get it, say experts.
What triggered the nosedive in oil price?
On Monday, the price of Brent Crude fell to as little as $35 a barrel – at the time the lowest it has dropped since 2016.
This was the result of Saudi Arabia’s aggressive tactics over the weekend to flood the market with cheaper oil after Russia refused to agree to OPEC proposals to cut production to help the market in the wake of the coronavirus and falling demand.
The stand-off sparked a 10 per cent plunge in prices on Friday, which escalated to almost a fall of almost a third by Monday after Saudi Arabia slashed its April official selling prices by up to $8 to compound pressure on Russia to fall in line.
And as the week has progressed, prices have slipped even further.
Brent Crude momentarily on Tuesday recovered to just over $37 a barrel but has since fallen below $33 on Thursday as self-isolation to prevent the spread of COVID-19 takes hold of the world’s bigger economies.
The last time oil was this low was in 2016 when it fell to $28 a barrel.
For the time being, oil isn’t getting any more expensive.
Saudi Arabia has flooded the market with cheaper oil after Russia refused to cut production
Who has cut pump prices so far?
As per tradition, Asda was the first to show its hand.
On Tuesday it reduced the price of both unleaded and diesel by 2p a litre at all 322 petrol stations across the UK on the back of falling wholesale prices.
It means motorists who fill up at an Asda forecourt right now will pay no more than 114.7p for a litre of unleaded and 116.7p for diesel.
Morrisons and Tesco both followed suit on Wednesday, hailed as the start of a ‘new fuel price war’. But that’s hardly the case.
UK fuel-price experts calculated at the start of the week that the knock-on effect of plummeting oil would wipe as much as 10p-a-litre off at the pump.
That means there’s already plenty of margin for supermarkets and other fuel retailers to really go to battle for the nation’s motorists if they wanted to.
Unfortunately, you’re more likely to win an all-expenses-paid trip to Wuhan for the Coughing World Championships than that happening.
In fact, four days since oil prices tumbled, retailers have made no additional efforts to cut pump prices as the ‘fuel war’ – for the time being – remains a ceasefire.
Asda cut both petrol and diesel prices by 2p-a-litre on Tuesday, and some supermarket rivals have followed suit. But is it enough?
And non-supermarket retailers are even refusing to even draw their weapons, market analysts claim.
Luke Bosdet, the AA’s spokesman on fuel prices, said drivers who fill up away from supermarkets will barely feel the benefit of the oil crash.
On Tuesday he said some retailers were as much as 8p-a-litre more expensive than Asda.
‘That’s a more than £4-a-tank difference between forecourts that have their customers’ interests at heart and those that don’t,’ he said.
Average UK fuel prices went UP when oil was crashing
Incredibly, the average price of petrol increased on Monday as oil was hitting four-year lows.
FairFuel UK – which has lobbied for a fuel-price regulator to be introduced in the UK and pushed for the Chancellor to freeze fuel duty for a tenth consecutive year this week – said on the day the price of oil plummeted by 30 per cent, wholesale fuel prices for retailers fell by 7p to 8p a litre.
However, average pump prices increased by between 0.4p and 0.9p per litre on Monday, with the average cost of petrol rising to 122.8p a litre.
It added that the last time oil prices were this low four years ago, pump prices were 20p lower than they are currently.
It calculated that, in order to match the fall in oil prices, average costs at filling stations must drop 16.3p – so to around 106.5p per litre.
That would be around 8p-a-litre less than the price guaranteed at Asda’s filling stations right now.
On the day oil prices crashed by 30% and wholesale prices dropped, the average cost of petrol and diesel across the UK went up, FairFuelUK said
‘It is staggering that drivers are not seeing the benefits of the massive fall in oil price to the level we saw three years ago,’ the campaign group said.
‘For decades the fuel supply chain, notably a few wholesalers have ripped off drivers at will.
‘When oil prices rise and fall, millions of drivers have absolutely no idea what subsequently, they will pay at the pumps each time they fill up their vehicles. It is never ever the same price!
‘There is no consistency, logic or clarity to the way pump prices are calculated. It remains a closely guarded secret in the fuel supply chain. If it wasn’t for the supermarkets’ forecourt price cuts, always lead by Asda, prices at the pumps wouldn’t be falling at all.’
Howard Cox, founder of the campaign, added: ‘This relentless profiteering has got to be stopped by the Government. Everyone knows what we pay at the pumps does not follow any logic or fairness when oil prices change.
‘The fuel industry has a moral duty to pass these savings on to consumers.’
When ARE we going to see pump prices fall and how low could they go?
With oil price currently in freefall, wholesale prices are now at their lowest level in four years, according to RAC and its Fuel Watch data.
However, it warns that drivers looking to take advantage of low pump prices shouldn’t be rushing out to brim their cars just yet.
It estimates that it takes a full two weeks for drivers to feel the reward of falling wholesale prices, as retailers cling on to their profits for as long as possible.
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The RAC told This is Money that, on the basis of major retailers buying fuel today, they’d be enjoying a margin of around 12p on each litre of petrol sold, and 10p on each litre of diesel.
This compares to a long-term average margin of around 5 to 6p on every litre.
The last time wholesale prices fell as low as they are today, unleaded wasn’t much above £1 a litre in 2016, according to the stats.
The average price of petrol fell to 106p a litre in March that year, though not until two weeks after wholesale costs had dropped.
‘That’s nearly 17p a litre below the current average of 122.8p,’ Simon Williams, the fuel spokesman for RAC, said on Tuesday.
RAC fuel spokesman Simon Williams said: ‘There is now enormous pressure for pump prices in the UK to drop significantly, by around 10p a litre from where they are today.
‘A drop of this size would see average petrol prices fall to 112p per litre, and diesel to 116p per litre, and we’d expect supermarkets to sell the fuels for as little as 108p and 112p respectively.
‘All eyes are now on the UK’s fuel retailers large and small to cut pump prices. it is vital drivers are given a fair deal and retailers accurately reflect the lower wholesale prices at forecourts.’
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