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Motorists benefit from petrol price drop
From the Financial Times of Tue, 23 Dec 2014 17:47:31 GMT
Motorists fill their cars at an Asda petrol station in east London, Friday September 16, 2005. Tesco Plc and Wal-Mart Stores Inc.'s Asda, Britain's two biggest supermarket chains, said they will cut gasoline prices at their filling stations today after oil declined on world markets. Photographer:Andy Shaw/Bloomberg News©Bloomberg

British motorists are set to gain from another round of sharp falls in the cost of petrol and diesel as the plunging price of crude oil feeds through to consumers.

Government data published on Tuesday showed the average price of petrol fell 2.6p to 113.7p a litre over the past week, while diesel slipped 1.6p to 120.8p.

That marks the 13th week in a row of declines and leaves average prices at the lowest level since March 2010 and down 13 per cent from the July peak of 131.1p.

The AA said the collapse in the price of Brent crude to about $60 a barrel was likely to lead to more price reductions on the forecourt to about 110p.

But he cautioned that speculation that prices could fall to £1 a litre or less was premature, arguing that further sustained falls in the price of crude would be needed to hit that level, based on current tax and foreign exchange rates.

Last week rival motoring group the RAC suggested petrol could fall below £1 a litre in the first few months of the new year, if forecasts that the price of crude would hit $40 came true.

On Friday supermarket chain Asda, which operates 245 filling stations across Britain, piled pressure on rivals by dropping its petrol price by 2p to 110.7p. But consumers living beyond areas affected by stiff price competition can find themselves facing much higher motoring costs.

Each litre of petrol and diesel sold in the UK attracts 57.95p of fuel duty and is also subject to 20 per cent VAT, implying that if there were no taxes petrol would cost about 36p a litre.

Edmund King, the AA’s president, said there was little evidence yet from UK government data on tax receipts that the fall in forecourt prices was tempting motorists into increasing their mileage.

“Consumption is struggling to get out of the rut created by drivers and families being forced long-term to adopt fuel-saving travel patterns to make ends meet,” said Mr King.

“It suggests that the savings from lower pump prices are being used to balance the books of family expenditure rather than increasing mileages. This points to the likelihood that much of the spare cash will find its way back to the high street.”

Despite consumers enjoying lower prices during November than a year ago, petrol consumption fell year on year. Data from the Department for Transport also point to the level of car and heavy goods vehicles use on British roads remaining below that of late 2009.

But the use of light goods vehicles on UK roads, thought in part to have been buoyed by the growth of online shopping and home delivery services, stands 12 per cent higher than third quarter of 2009.

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