The AA has dismissed suggestions by rival motoring organisation the RAC that petrol could fall below £1 a litre in the New Year, but said the crash in fuel prices over the past month is the third largest it has recorded.
In its latest monthly fuel report the AA said: “The possibility of the average petrol pump price falling below £1 a litre in the near future remains remote. Fuel duty + VAT alone accounts for almost 70ppl. A further 5ppl to 10ppl for retailer/suppliers margins + VAT, leaves wholesale +VAT needing to be around 20ppl to 25ppl.
“With wholesale petrol including VAT currently at around 33ppl, the wholesale price would need to fall at least a quarter for the average petrol pump price to approach the £1 mark – with a further hefty fall in the oil price to help make that happen.
“Market experts have told the AA that this would require oil to drop to around $40 a barrel, a third lower than it is now.”
However it added: “A 6.6ppl crash in UK average petrol pump prices over the past month is the third biggest monthly fall in the 25-year history of the AA Fuel Price Report.”
The biggest one-month fall recorded was 11.5ppl during the financial crash in October to November 2008 when the average unleaded petrol price fell from 106.4ppl to 94.9ppl.
Since mid-November, the average price of petrol has dropped from 122.93ppl to 116.32ppl, a reduction of 6.61ppl. Over the past month, the average price of diesel has fallen 5.27ppl, from 127.43ppl to 122.16ppl.
AA president Edmund King, commented: “The parallels with the 2008 crash, albeit that was a market in freefall while this one has been engineered by OPEC and could be stopped anytime, carry a warning from the ghost of Christmas past. In 2009, a new year brought a new assessment of the market and pump prices started to rise again on 5 January.”
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