How much are you paying at the pump?
Before 2008 paying as much as a pound for a litre of petrol was inconceivable. Fast forward 7 years and paying a pound would feel like Christmas has come early. According to the RAC, this new price does seem likely as falling oil prices have forced supermarkets to slash the cost of unleaded petrol by up to 2p per litre.
Household names such as ASDA, Tesco and Morrisons have already reduced charges across their fuel stations, and Sainsbury’s are thought to be in hot pursuit too.
"The heat has really been taken out of the cost of motoring this summer, with the big four supermarkets now selling unleaded and diesel for considerably less than in recent months”, said Rod Dennis, an RAC spokesperson.
"Drivers should be noticing cheaper fuel across the UK, with some independent retailers also proving to be fiercely competitive when it comes to price.”
In practice this means that the retailer has reduced unleaded prices by around 5p per litre in the past four weeks, and lowered diesel prices by 9p.
"The reason we've been slower to see unleaded price cuts is because the wholesale price of petrol - the price retailers buy the fuel for - has not fallen at the same rate diesel has”, said Mr Dennis.
Since May diesel prices have seen reductions - influenced by increased capacity from Asia and earlier this month, prices fell below the price of petrol for the first time in fourteen years. Indeed these price reductions in the UK are driven by the wider fall in global oil prices, which have plummeted by more than 50 percent from their highs a year ago.
What has caused this dramatic decline? Well the explanation lies in the economics of demand and supply. An unprecedented global surplus in oil as a result of massive increase in US supply through the shale revolution is one factor. And that, combined with the decision by other major oil producers such as Saudi Arabia and the rest of OPEC to maintain their production levels, rather than sacrifice their own market share to restore prices, has contributed to this worldwide oil glut.
The International Energy Agency has suggested that prices could fall further, with the new low rates lasting well into 2016.
Mr Dennis has accordingly predicted more cuts to consumer prices. "If the conditions stay right, we could see some even lower prices in a few weeks as people return to work after the summer and the school run begins again. And if Brent Crude were to move to the 40 US dollar per barrel mark, the prospect of some enterprising retailers selling fuel for £1 per litre will make a return."
Steve Gooding, director of the RAC Foundation, echoed his forecast. "The current retail margin on petrol is almost twice as much as the long-term average which is another indicator that pump prices could fall further”, he stated.
"However it is worth remembering that the biggest influence on what motorists pay at the forecourts is not the oil price but taxation."