The RAC is predicting petrol could be selling for less than £1 a litre for several months at the start of 2015, due to the plummeting price of oil – a pump price last seen in late May 2009.
The price of Brent crude has fallen below $60 a barrel for the first time since early July 2009 and is predicted to keep on dropping after OPEC (Organisation of the Petroleum Exporting Countries) indicated it will not cut production even if oil hits $40 a barrel.
RAC fuel spokesman Simon Williams said: “Current forecasts are for average petrol prices to fall to below 110ppl in the next fortnight and diesel to drop to under 116ppl. At these average prices across the country the cheapest retailers will almost certainly be selling petrol for around 105ppl, or even lower.
“It is, however, important to realise that the oil and fuel market can always change due to a number factors, including the strength of the pound against the dollar and the global production of oil. If the current oversupply situation remains then it will clearly be good news for motorists and businesses that rely on the road network. With the United Arab Emirates energy minister saying OPEC will not cut production even if oil falls as low as $40 a barrel, we have every reason to think petrol at under £1 early in 2015 is a very real prospect.
“It’s also important to remember that while the cost of fuel itself has fallen, it currently only represents around a third of the overall pump price with the lion share being made up of fuel duty and VAT. At £1 a litre duty would be 57.95p and VAT 16.67p, leaving the cost of the oil and retailers’ margin at 25.38p – meaning tax would be three quarters of the forecourt price.”