Drivers hit with second month of pump price rises

New figures by the RAC show higher wholesale costs meant both petrol and diesel prices rose for the second consecutive month, last month with petrol prices increasing, on average, by two pence and diesel by almost a penny.

Petrol station retailers were quick to pass the higher costs onto drivers who are already noticing the effect that rising oil prices and the falling value of the pound are having on their wallets.

Feeling the pinch

Both a 4% jump in the cost of oil (from $63.81 to $68.07) and a 2% drop in the pound’s value against the dollar (from $1.32 to $1.30) during March have caused the pump price rises.

This means filling a 55-litre family car with unleaded now costs £67.22. Data from the RAC shows the average litre of unleaded increased two pence in March to 122.58 pence per litre (ppl). Diesel prices increased too. At the start of the month, they cost just under 130 ppl but have since risen to 130.67 ppl, meaning motorists pay around £71.87 to fill up their cars.

Petrol costs eight pence less a litre than in October last year, when drivers paid 131 ppl—the highest price seen since July 2014, when diesel was also expensive; selling at 136 ppl. The RAC, who described March as ‘a rough month’ for petrol drivers believes diesel drivers are feeling the pinch even more than petrol drivers at the moment. Their data shows that compared to this time last year and the year before, a litre of diesel is, on average, eight pence more expensive than petrol. Worse, though, diesel costs eight pence more than it did 12 and 24 months ago, meaning diesel drivers must pay an extra £4.30 to fill their tanks. For most people. that extra money isn’t coming in the form of a pay-rise.

It’s obvious that, in the past two months, retailers haven’t hesitated to increase their pump prices to get customers to shoulder the higher cost of wholesale petrol. Supermarket petrol went up 1.7 ppl in March to 118.59p while diesel rose from 1.27 ppl to 127.48 ppl.

Last month both Sainsbury’s and Asda raised their prices by two pence a litre, with Asda increasing their prices most days from the 21st of February. They ended the month with their petrol priced at 117.31 ppl.

Price of petrol to rise further

“Throughout March, the wholesale price of diesel was on average 6p a litre more than petrol. This gap has now closed which should hopefully bring some relief to drivers of diesel vehicles.

“If retailers play fair with motorists, the price of the fuel should fall by around 3p a litre in the next fortnight, whereas petrol looks like it’s set to rise further with at least a penny or two likely to go on in the coming weeks,” he said.

“Fortunately, normal competition between supermarket fuel retailers over the price of petrol has resumed after four months of Asda being considerably cheaper than its competitors.

“Whether this is as a result of keener pricing from the others or from Asda moving its unleaded price closer to its competitors is hard to know.

“Supermarkets play a vital role in UK fuel retailing as despite only having a fifth of forecourt sites they have 45% of the fuel market which means that everyone else selling fuel has little option but to compete with them.

“And, if there isn’t good competition between them it can mean the UK average price of fuel is adversely affected, to the disadvantage of all drivers.”

Cut the cost

Once you’ve found where you want to buy your petrol or diesel by using our new app and have filled up, you’ll want to make your fuel last as long as possible. You can do this by making sure you look after your vehicle, by driving in the highest gear possible (within the speed limit!), and by trying not to lose momentum by anticipating the actions of other road users.

Remove roof bars and roof boxes (and any other unnecessary weight from the car) when not in use and try to drive with your windows shut to reduce ‘drag’. With that said, limit your use of the air conditioning, as it uses more fuel.

Driving with a warm engine is more efficient, so try to combine journeys rather than taking several short trips.

Consider reserving your cruise control for motorways or at least for when you’re driving on constant flat surfaces or you risk using more fuel.

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Jason Lloyd, Managing Director of PetrolPrices, said the following:
“Following the publication of this article, the Competition and Markets Authority (CMA) announced that they are blocking the proposed Sainsbury’s and ASDA merger because of concerns around rising prices on products in the stores and fuel prices. Sainsbury’s did propose keeping the ASDA fuel price promise for five years and a 3.5 pence per litre gross margin on Sainsbury’s fuels, but the CMA responded by saying that policing this would be almost impossible and impractical because it would negatively impact the rest of the petrol retail industry, where prices are market determined.

Fair Fuel UK has been pushing to MPs once again the idea of regulating fuel pricing. It is worth showing members what markets have their fuel prices controlled rather than determined by market forces around the world. As you will see most countries where prices are controlled are due to factors where market competition is not able to fully thrive there, such as regulatory, socioeconomic, geographic or geopolitical instability.”

[Source: Globalpetrolprices.com April 2019]

“Prices for Belgium and Israel regulated by a price ceiling are currently higher in fuel costs than the UK, which proves that regulation itself does not guarantee lower prices, it only guarantees uniformity. The UK is currently the 16th most expensive country (or 27th Cheapest) in Europe based on the lowest modal average price (Source: Globalpetrolprices.com).

It’s the wide and varied competitiveness of the UK marketplace itself that keeps the price spread between the highest and lowest much wider and the lowest prices lower. If you regulate pricing, you reduce competitiveness, the price spread gets narrower and the lowest prices would increase to compensate for retailers unable to fluctuate pricing more freely.

Drivers are sensible enough to know the places to avoid when they fill up, but if you force the industry to follow pricing in a narrower range with a ceiling, the likely law of unintended consequences is that the lowest prices will increase and pricing will fluctuate more per station, such as in Germany where it can change up to 16-20 times in one day. This is called intra-day pricing and would mean it would be harder for drivers to know where and when the best times to fill up would be.

With the recent furore over the Government demonising Diesel fuel, which has led to record levels of CO2 being recorded in the UK as people switch from efficient Diesel cars to big engine petrol SUVs, the Government should be very careful considering regulating the petrol retail industry for fear that reducing competitiveness could mean fuel prices are higher overall and change more often for drivers. The backlash from drivers for this happening could be unimaginable if the Government and MPs decide to do this.”

What are petrol and diesel prices like where you are? Are you struggling to afford to fill up your tank? Tell us in the comments.