Petrol and diesel price cuts expected as oil hits $40 a barrel

The price of a barrel of oil fell to $40.40 – its lowest price since February 2009 – on Monday, paving the way for another round of pump cuts and making the sight of £1 a litre at the cheapest forecourts ever more likely.

RAC Fuel Watch data shows Brent crude dropped nearly $2 a barrel from Friday and $5 from a week ago, pushing down wholesale petrol and diesel prices and signalling expected pump reductions of around 2p a litre in the next fortnight.

The average price of petrol, which has fallen for the last four months, currently stands at 108.01p whereas diesel is at 110.24p, still close to the September price of 109.76p which was its lowest since December 2009.

RAC fuel spokesman Simon Williams said: “Events in Paris made oil traders react on Monday causing a sudden dip in the price of Brent crude to the $40 mark which has not been seen for more than six years. With oil prices already consistently low as a result of too much supply, the dip – even though it will be temporary – should still be reflected in wholesale prices, making fuel cheaper for motorists.

“We hope retailers will be quick to pass on these new wholesale fuel savings at the pumps to make the cost of litre cheaper still. A barrel of oil has now not been above $50 since mid-October and not consistently above that mark since the end of July.

“After a summer of lower forecourt prices, motorists are now looking forward to the prospect of yet lower petrol and diesel in the run-up to the expensive festive period. While we are a way off average petrol prices reaching £1 a litre, there is a good chance the most price-competitive fuel retailers will take the plunge.”

The price of a barrel of oil began to tumble a year ago having been as high as $115 in mid-2014 and fell to $45 in mid-January which led to the average petrol price reaching a six-year low of 106.09p in early February. While the barrel price rebounded to the $60 level in late February/early March and in late June/early July, it dropped again and has subsequently stayed low. And, even after hitting $40.40 on Monday (16 November), it only went back up slightly on Tuesday, finishing at $41.56.

Simon Williams added: “Low oil and fuel prices appear to be here to stay as cutting supply to shore up prices is not an option for OPEC – the Organisation of the Petroleum Exporting Countries – as it is dead set on not letting its competitors take any of its share, something which would almost certainly happen with a higher barrel price. With yet more oil due to hit the market as Iran begins to produce again following its nuclear deal with the West, the long-term outlook has to be low oil prices for a further 12 months.

“Let’s just hope the Chancellor doesn’t spoil the party by using lower prices as an excuse to raise fuel duty in his Autumn Statement next week. The Treasury’s own research shows that lower fuel prices can boost economic GDP and at a time where some think tanks are predicting the economy will slow, surely the best way to keep the country moving and keep the economy going is to freeze fuel duty.”

Motorists can keep abreast of the latest fuel prices by visiting: www.rac.co.uk/fuelwatch or following #racfuelwatch on Twitter.