Fuel ‘still too expensive’ despite 9p drop in December
The average price of fuel fell 9p a litre in December, but a motoring group believes it needs to be cut further as it is still overpriced by double-digits.
The average price of petrol fell by 8.4p last month, taking the price to 151p a litre, while diesel came down by 9.4p, taking it to just shy of 174p a litre.
For those filling up at a supermarket, prices fell by 10p a litre at one of the big four, taking it to 147.76p on average. Meanwhile diesel drivers benefited from an 11.4p drop from 181.66 to 170.23p.
All-in-all, the petrol price cuts saved drivers an average £4.63 when filling up the tank, while diesel drivers made cuts of £5.19, according to the RAC Fuel Watch.
However, despite the cuts and the savings to drivers, the RAC suggested that petrol is currently over-priced by around 11p a litre, while diesel is 14p a litre too expensive.
The RAC explained that wholesale prices – which have fallen considerably since mid-October – remained largely unchanged with petrol averaging 106p a litre throughout December while diesel was 123.4p.
Based on these wholesale prices and allowing for a 10p-a-litre retailer margin – 3p more than the long-term average – the RAC believes petrol should be being sold around the UK for 140p – 11p less than the current UK average. For diesel drivers the figure should be nearer to 160p a litre – 14p lower than the average at the end of 2022.
It noted that membership-only retailer Costco, “which consistently charges some of the lowest prices in the UK”, is currently charging a store-wide average of just 137.3p for unleaded and 158.4p for diesel which means members can save £7.50 on a tank of petrol (£75.51) and £8.50 for diesel (£87.17).
‘Give drivers a fairer deal’
RAC fuel spokesman, Simon Williams, said: “On the face of it, December looks like it was a good month for drivers with 9p coming off at the pumps on top of November’s 6p, but there’s no question that the drop should have been far bigger given how far wholesale prices have come down.
“For weeks we’ve been calling on the big four supermarkets to cut their prices more substantially to give drivers a fairer deal when they fill up, so even though they have reduced their prices collectively by more than 10p a litre in December, they are still nowhere near where they should be given the scale of the drop in wholesale prices.”
Northern Ireland and Europe set price precedent
Williams added that prices in Northern Ireland are a good reference for what should be happening across the rest of the UK as petrol was 4.5p cheaper there than the UK average at the start of December. It was nearly 7p lower at the end of the month at just 144.43p.
For diesel the difference is even more pronounced as a litre was 7p cheaper at the beginning of December and 9.5p less by the close at 164.55p.
“If fuel can be sold this cheaply in Northern Ireland, then this must mean something is very wrong with fuel retailing in mainland UK,” he said.
He added: “While Northern Ireland does benefit from a fuel price checker website run by the Consumer Council this isn’t the main reason prices are lower there. A combination of factors contributes to making fuel cheaper including a higher retailer-to-car ratio than in the wider UK, more fuel distributors as well as the presence of sometimes cheaper fuel across the border in the Republic of Ireland. Interestingly, the supermarkets also don’t have the same hold on fuel retailing in Northern Ireland with only 28% market share compared to 43% on the other side of the Irish Sea.
“In Europe prices are also considerably cheaper as the average price of a litre of unleaded is 144p and diesel 152p. And just across the Channel in France unleaded is an average of 146p and diesel 154p. In fact, when compared to the 27 EU countries we currently have the second most expensive diesel and the sixth most expensive petrol.”