Increased petrol production should keep pump prices pegged down in March, while the price of diesel is likely to move back above petrol, according to the latest RAC Fuel Watch report.
It said the average price of petrol fell slightly in February, marking eight consecutive months of falls. From the beginning of July 2015, when the average unleaded price was 117ppl, prices have fallen to reach 101.93ppl at the end of February – a drop of 15ppl.
February saw a small fall of 0.16ppl in the price of unleaded at the pumps. However, the wholesale price of petrol finished the month 2ppl lower than at the start.
The RAC Fuel Watch report said the price reduction was due to increased petrol production, which could help to keep pump prices at their current level in the short term, or possibly even reduce them slightly in March.
The average price of diesel at the pumps remained largely static in February, rising from 101.11ppl to 101.18ppl, despite a 2.5ppl increase in the wholesale price.
While this is a turnaround from January which saw a 5ppl reduction, the average price of diesel is still nearly 1ppl cheaper than petrol. However, the report says the average forecourt price of diesel has been lower than petrol since 25 January 2016 but is likely to switch back again in March.
Average supermarket prices of both petrol and diesel hardly changed in February: petrol started the month at 99.88ppl and finished at 99.86ppl whereas diesel rose marginally: 97.96ppl to 98.24ppl.
During February the two factors that have the greatest effect on UK fuel prices – oil prices and the value of sterling against the dollar – both suggested pump prices could increase in the longer term.
The pound lost ground against the dollar throughout the month, falling from $1.44 on 1 February to $1.39 by the end, while oil underwent a late price surge to finish at $35.80 a barrel having started the month at $32.75.
RAC fuel spokesman Simon Williams said: “Forecourt prices of both petrol and diesel have remained remarkably stable in February despite the pound losing 3% of its value against the dollar and talk of an oil production cut. The oil price had been consistently around $30 for most of the month but in the last few days of February rose to around $36 – a price we haven’t seen since the beginning of the year.
“Motorists are still benefiting from low prices at the pumps, with the supermarkets having held their petrol prices under £1 a litre thanks to a depressed wholesale price. In fact the wholesale price of petrol has fallen due to refineries scaling down heating oil production and switching instead to producing more unleaded, together with the US refining more petrol as it gears up for the American driving season which starts in May. This tends to have the temporary short-term effect of reducing the wholesale price, but this may change as demand for petrol picks up in the States.
“While the average pump price of diesel has been cheaper than petrol since the end of January this may not last much longer due the increase in petrol production and its lower wholesale price. But the additional supply of diesel on the wholesale market brought about by greater refinery capacity in Saudi Arabia and India should mean prices remain comparatively stable for diesel motorists at the pump.”