The petrol cost in the UK is approaching £1 a litre for the first time since 2016. Some filling stations around the country have even been reported offering petrol at less than £1.
But motorists may be hard-pressed to find low deals as prices vary widely, reports BBC.
The key factor affecting petrol is the wholesale oil market.
Oil prices slumped in March after a price war broke out between Saudi Arabia and Russia.
It kicked off when Saudi Arabia failed to convince Russia to back production cuts that had been agreed with the other members of the Opec oil producers’ group.
Oil prices tumbled and pretty soon fell to half the level they had been at just a couple of months earlier.
In January the price of a barrel of Brent Crude had touched $70.
By mid-March the price war had help it to fall to close to $30 a barrel.
But the global coronavirus crisis has also hit demand as airlines slashed services and travel restrictions reduced the amount of petrol pump activity.
The price of oil fell below $25 a barrel – the lowest level since 2002.
While the price of petrol is linked to the wholesale price of oil, it is competitively driven.
That means the cost motorists are charged is not directly linked to crude. Instead, suppliers control the prices they sell petrol at.
They tend not to reduce prices quickly – or raise them rapidly when oil goes up.
That said, the pump price cuts in March were dramatic.
UK petrol prices fell by their largest margin in 12 years during the month, according to the RAC.
More than 9p came off the average price of unleaded in the month while the price of diesel was down by nearly 8p.
Another factor propping up the price of fuel is that the biggest proportion of the money you hand over for a litre of petrol goes to the government in the form of tax.
Fuel duty is charged at 57.95p per litre.
On top of that you have to pay VAT at 20% on the cost of petrol.
It varies according to which supplier you use and where you are in the country.
Supermarkets tend to offer the lowest prices, mainly because they use petrol as a loss leader.
That means they sell it cheap in the hope that once you’ve filled up, you’ll pop into the accompanying store and spend lots more cash.
So while the average cost of petrol at the end of March was 113.54p, according to the RAC, supermarket prices were as low as 104p a litre.
But prices at local garages are set according to nearby competition.
So if you only have one local garage close by with no immediate rivals, it will be able to charge more as it has, to a degree, a captive market.
That’s why prices vary even at the same supermarket chain or petrol company.
The AA said the cheapest average unleaded petrol price at the end of March of 108.13p was found in Northern Ireland.
But in the south-east of England the average was more 8p higher at 116.19p.
Competition has driven the price of petrol down towards £1.
By the beginning of April, the cheapest litre on the market was being flogged at just 102.7p, via a supermarket.
But hopes of it crashing through the £1 barrier remain in some doubt after the oil-producing countries’ organisation Opec was reported to be working on restricting production.
Any such move would depend on Saudi Arabia and Russia ending their price war.
