Plummeting fuel prices may have bottomed out, according to the RAC, because oil prices have staged a recovery.
Since oil reached a 12-year low of $26 a barrel on Wednesday 20 January the price has rebounded, finishing the month at $33.12, only $3 below where it started the month at $36.54. This has caused the wholesale cost of petrol and diesel to rise again, although diesel still remains 3ppl cheaper than petrol.
At the pumps average petrol prices dropped to 101.86ppl on January 24 before recovering slightly to 102.28ppl on February 2. Average diesel prices reached 101.05ppl on January 28, and have since edged slightly higher at 101.17ppl on February 2, but are still 5ppl lower than a month ago.
For the second time in six months petrol and diesel prices “flipped” with diesel becoming cheaper than petrol on January 24. The previous occurrence was on July 29 last year, and lasted for two months. Prior to that it had been 15 years since diesel was cheaper than petrol.
RAC fuel spokesman Simon Williams said: “Motorists have seen petrol and diesel prices reach their lowest points since 2009. January saw the oil price go into free fall with talk of a barrel dropping to $20 and possibly even to $10, but since the low of $26 a barrel the market has started to creep back up. If this continues for a sustained period, wholesale costs will rise further which will in turn lead to pump price increases.
“However, the oil market is notoriously volatile, even in more stable economic times, so it’s still possible that the price could drop back again. And, even if there is a rise in the oil price, it seems unlikely that it will be drastic, as OPEC seems set to continue producing more oil than is demanded to retain its market share. While there has been talk of a production cut, the market has yet to see evidence of this.
“The other factor which is not helping the situation from a motorist’s perspective is the fact that the pound has weakened significantly against the dollar from $1.47 at the beginning of January to $1.42 by the end. This has undermined some of the benefit of the falling oil price and, with oil traded in dollars, this could prove to be even more harmful if the pound continues to lose value against the dollar while the oil price goes up.”
Meanwhile, HM Revenue and Customs data for December 2015 shows combined sales of petrol and diesel were 1.8% down on November at 3.938bn litres, but 0.4% up on December 2014. More petrol was used in December 2015 than in the previous month – 1.458bn litres compared to 1.437bn, and this was also a 0.8% increase on December 2014. Diesel usage fell by 3.7% from 2.574bn litres in November to 2.480bn in December, but was unchanged year-on-year. Sales of both petrol and diesel in December netted the Treasury £2.282bn in fuel duty revenue.