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Good news as supermarkets drive down petrol prices

12 August 2008 / by Daniela Gieseler
British supermarkets have triggered a new phase in the petrol price war, and now Morrison's dropping the price of both diesel and unleaded petrol by 2p at their forecourts.

With motorists' finances already being sqeezed by rising car insurance premiums, fuel prices reached an all-time high in July, when unleaded petrol cost 119.7p a litre and diesel soared up to 133.25p per litre. This left many motorists, who had only filled their tank with a minimum amount of petrol, stranded on the roadside having to call on car breakdown services.

After the third price cut in a row, the national average for unleaded petrol is now 109.9p a litre, while diesel costs 121.2p per litre on average, meaning that it costs motorists £5 less to fill up their tank than before the first price drop three weeks ago.

Other supermarkets quickly followed suit, with ASDA and Sainsbury's both announcing 2p price cuts, whereas Tesco vowed it would match the lowest price in the local area on all of its forecourts.

"We are moving petrol prices down in order to ensure we offer the best price locally," a Tesco spokesperson said.

The supermarkets' reduction of petrol prices reflects the falling price of crude oil, which saw a record high of $147 a barrel in July, but has now gone back down again by $30.

The AA welcomed the price cuts, but criticised that petrol prices were still falling far more slowly than crude oil and that British motorists still pay far more for their fuel than drivers in other European countries such as Spain, France and Germany.

Also, prices differ considerably throughout the country, as AA spokesman Paul Watters commented: "Cheapest prices in many southern towns are still two to three pence per litre above what drivers are paying in areas where competitive supermarkets are engaging in a dogfight."

ASDA is the only one among the big supermarkets which sets its price on a national level, whereas the other three set them locally. Tesco and Sainsbury's will also only commit to publish average prices.

With the supermarkets offering competitive prices and motorists cutting down on petrol usage, hundreds of smaller forecourts have lost custom and been squeezed out of business this year – so the winners of the petrol price war are the big chains and, for the moment at least, the consumer.

© Fair Investment Company Ltd