Fuel price war looms as wholesale costs slump, says AA

FUEL retailers may be set to engage in a price war, the AA has said.

A 3p per litre slump in wholesale costs this month suggests pump prices could be about to drop, according to the AA.

This would be welcome relief for motorists who are being hit by prices at a four-year high after 11 consecutive weekly increases.

The average cost of a litre of petrol stands at £1.31 at UK forecourts, with diesel costing £1.35, Government figures show.

But a recent strengthening of the pound and a drop in oil refining margins “should force a correction in pump prices”, the AA said.

The organisation’s fuel price spokesman Luke Bosdet said: “Drivers were told earlier this month that there was ‘no end in sight’ to rising pump prices. Now, they should be looking for a £1.50-a-tank cut in petrol costs.

“The key question is to what extent and how quickly the fuel retailers decide to pass on the savings.

“In the past, such a significant drop in wholesale prices would have triggered a pump price battle among the supermarkets. For the moment, drivers should keep an eye out for competitive oil company sites taking the opportunity to undercut expensive supermarket sites.”

There is growing speculation that the freeze on fuel duty could be scrapped in this autumn’s Budget.

Earlier this month Chancellor Philip Hammond told MPs that previous analysis showing the benefits of the freeze offset against tax losses would “have to be looked at again in the context of the economy today”.

Fuel duty has been kept at 58p per litre since 2011.