UK Petrol and Diesel Prices See Fastest Drop of 2024: A Relief for Drivers and Inflation

In a welcome development for UK drivers, the price of petrol and diesel is falling at its fastest rate this year, providing significant relief to household budgets. Recent analysis by the RAC reveals that UK drivers are now paying about £4 less to fill up a typical family car than they did just a month ago. The average price of unleaded petrol currently sits at 136.15p per litre, a decrease of 7p from 142.86p last month. Diesel prices have similarly dropped to just under 141p per litre, down from nearly 148p in the same period.

This marks the most substantial decline in fuel prices since December last year, when prices similarly fell by 7p per litre. The trend is predicted to continue, with the RAC forecasting that petrol prices could fall further to 132p per litre and diesel to 138p per litre in the coming weeks, potentially reaching their lowest levels in three years.

Factors Behind the Decline in Fuel Prices

The sharp decline in UK fuel prices is attributed to two key factors: lower global demand for oil and the strength of the British pound against the US dollar, the currency in which oil is traded. As of last week, the price of oil had dropped to $73 per barrel, a significant reduction driven by weaker international demand. Simultaneously, a stronger pound has made it cheaper for UK retailers to purchase oil on the global market, leading to further price reductions at the pumps.

This marks a stark contrast to earlier in the year when, in April, petrol prices soared to 150.1p per litre and diesel reached 158.3p per litre, putting additional pressure on household budgets. The drop in fuel prices comes as a relief, especially for households where transportation costs make up a substantial portion of monthly expenses.

Impact on Inflation and Consumer Spending

The fall in fuel prices has also had a positive impact on the UK's inflation rate. According to the Office for National Statistics (ONS), the drop in fuel costs played a significant role in keeping headline inflation steady at 2.2% for August. Lower fuel prices reduce transportation and production costs across various sectors, contributing to a slowdown in overall price increases for goods and services.

Simon Williams, RAC’s lead spokesperson on fuel, highlighted the benefits of falling fuel prices: "It’s really encouraging to see pump prices coming down so rapidly, which we know is as good for drivers’ wallets as it is for keeping the headline level of inflation in check." He also noted that fluctuations in global oil prices and exchange rates can be unpredictable, making it essential for drivers to take advantage of lower fuel costs when they can.

The Future of Fuel Duty and Potential Increases

Despite the current decline in fuel prices, UK drivers may face a rise in fuel duty in the near future. The RAC has warned that the government may reintroduce a 5p per litre fuel duty cut, implemented by Rishi Sunak in March 2022 following the Russian invasion of Ukraine, which had caused a surge in global energy prices. The Treasury has been losing £2 billion annually due to this cut, and Labour’s Shadow Chancellor Rachel Reeves has indicated that it may be reversed as part of a broader effort to address a £22 billion shortfall in public finances.

While the RAC typically opposes increases in fuel duty, it has pointed out that the benefits of the current 5p discount have been largely absorbed by higher-than-average retailer margins. As the UK transitions towards electric vehicles (EVs), Simon Williams suggests that the government may need to consider alternative taxation methods, such as a pay-per-mile system, to replace the current fuel duty structure.

Advice for Drivers: How to Make the Most of Falling Fuel Prices

The RAC advises drivers to remain vigilant and shop around for the best fuel prices to maximize their savings. Supermarkets are currently offering some of the lowest prices, with unleaded petrol priced at 133.23p per litre and diesel at 137.69p per litre, well below the national average. Northern Ireland continues to lead the way with the cheapest fuel prices in the UK, with petrol at 131.5p and diesel at 134.2p per litre.

To assist drivers in finding the cheapest fuel, the RAC recommends using tools like the free myRAC app, which allows users to search for the lowest fuel prices within a 10-mile radius. The RAC also offers daily price breakdowns and historical data on their website, helping drivers stay informed about fuel trends and make the best choices when filling up.

In Conclusion

As UK fuel prices reach their lowest levels in nearly three years, drivers can breathe a sigh of relief, knowing that they are saving money on every trip to the pump. However, with potential changes to fuel duty on the horizon, it remains important for motorists to stay informed and take advantage of the tools and resources available to minimise their fuel costs.