Drivers may see fuel costs drop very soon

As long as retailers pass on the savings they’re seeing from new stock purchases, fuel prices at the pump are expected to drop by at least 6p per litre for petrol and 3p per litre for diesel, according to an analysis of RAC Fuel Watch data.

This price reduction has been made possible by the drop in oil prices, which fell from above $80 per barrel in mid-January to just under $70 today. Over the past week, the average price of oil has been around $69 per barrel, the lowest sustained price since August 2021.

If oil stays near $70 per barrel, the RAC predicts petrol prices could fall further, potentially reaching around 130p per litre, with diesel dropping to approximately 140p. In Northern Ireland, where competition among retailers is strong, petrol is already averaging 133p per litre and diesel 139p – 6p and 7p cheaper than the UK averages, respectively.

“After five months of rising prices, it’s good news that wholesale prices have dropped significantly, and we should soon see this reflected at the pump,” said RAC’s head of policy, Simon Williams. “We expect retailers to begin lowering prices this week as they restock at cheaper rates.”

If the price of crude oil holds steady around $70, drivers could see petrol drop toward 130p per litre. But Williams warned that much of this will depend on how much of the savings retailers pass on to the customers. “Hopefully, the usual ‘rocket and feather’ effect – where prices rise quickly but fall slowly – won’t apply this time.”

In 2022, the government asked the Competition and Markets Authority (CMA) to monitor competition within fuel retailing. The CMA’s first report found that major retailers had overcharged drivers by £900m, and by 2023, this figure had risen to £1.6bn.

In its most recent update last November, the CMA expressed concerns about the level of competition among fuel retailers. Its next quarterly report is expected later this month.

What affects fuel prices?

Fuel prices at the pump are influenced by a mix of global and local factors. The main driver is the wholesale price – what retailers pay for fuel before it gets to consumers. This price changes based on elements such as crude oil prices, the strength of the pound against the dollar, distribution costs, and taxes.

Crude oil prices are the biggest factor, affected by global supply and demand, political issues, and how much oil is being produced. Since fuel is bought and sold in US dollars, a weaker pound means higher prices for UK drivers. Distribution costs, retailer margins, and taxes like fuel duty and VAT also play a role in the final price.

While taxes are pretty steady, factors such as oil prices and exchange rates can fluctuate a lot, causing prices to go up and down. In the end, the price you pay at the pump depends on a mix of factors, both local and global, all of which determine how much it costs to fill up.

Want to save a couple pence on your fuel? Keep an eye on our handy fuel price checker. You can enter your postcode and the type of fuel you need and instantly see prices in your area.

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