£1-a-litre call misunderstands Brent to pump relationship

The group representing UK petrol retailers has dismissed calls from motoring groups for yet lower diesel prices.

Chairman of the Petrol Retailers Association, Brian Madderson, said calls by the RAC for prices to come down to £1-per-litre misunderstood the relationship between prices at the pump at the cost of Brent crude oil.

Spokesman for RAC Fuel Watch Simon Williams said on Wednesday that while the price of diesel dropped below petrol on many forecourts a few months ago, he believed retailers may have been “tempted to take advantage of motorists” used to paying more for diesel than unleaded.

“Our Fuel Watch data shows the average price of diesel should come down by about 6p to around £1 from its current average price which indicates that the wholesale cost-savings haven’t been passed on quickly enough,” he said.

PRA chairman Brian Madderson
PRA chairman Brian Madderson

Rejecting the analysis, Mr Madderson said that while it was true Brent crude oil fell below $40 a barrel this week – the first time since 2009 – its relationship with pump prices “is not linear”.

“According to Experian Catalist the average price for petrol in the UK is still close to 107ppl, and the wholesale price last night was only 0.37ppl less compared to mid-October,” he said.

“It would require a substantial period of time for Brent crude oil to remain at or below $40 a barrel, and for the wholesale price to fall dramatically in order for us to see pump prices fall to the predicted level by Christmas or even the New Year.”

The news came as a number of supermarket chains dropped their petrol prices below the £1 ceiling for the first time in years.

However, Mr Madderson said the tactic was simply struggling supermarkets attempting to draw shoppers away from discounter stores by using fuel as a loss leader.

“This action defies commercial reality in an increasingly volatile market and leaves the independent forecourt retailers having to explain to motorists why their pump prices are not falling in the same manner,” he said.

“If and when the wholesale price of petrol does fall – and it is higher now than it was in mid-November – then the UK will see a reduction to average pump prices which are still stubbornly sitting at above 106ppl.”

The UK’s cheapest fuel this week was found at Top Oil Newtownabbey, which was selling petrol at 94.9p. Diesel was also 94.9p.