Motorists across the United Kingdom are experiencing welcome relief at the pumps as petrol prices have plummeted to their lowest levels in nearly five years. According to the latest analysis from the RAC, the average cost of a litre of petrol at UK forecourts has dropped to 131.91p. This significant reduction marks the most affordable fuel prices seen since July 2021, when the average stood at 131.81p per litre.
Substantial Savings for Drivers
The motoring organisation has reported that petrol prices have decreased by more than 5p since the beginning of December. This decline translates into tangible savings for consumers, with drivers saving nearly £3 when filling a typical 55-litre family car. Diesel prices have also followed a downward trend, falling by 3p per litre since early January to an average of 140.97p.
Global Oil Market Influences
The primary driver behind this price reduction is a notable fall in the global price of oil. On 7 January, oil prices dipped below the US$60 per barrel mark, a threshold not observed since February 2021. This decrease in wholesale costs has gradually filtered through to forecourt prices, benefiting end consumers.
Simon Williams, Head of Policy at the RAC, commented on the development, stating: "Seeing the price of petrol dip under 132p is a genuine boost for drivers, rewinding prices to those we last saw four and a half years ago. With even cheaper prices available depending on where drivers fill up, this is a positive start to the year for household budgets."
Retailer Margins Under Scrutiny
Williams further noted that "Had retailers passed on more of the savings they've benefited from when buying new fuel supply on the wholesale market, the January price reductions would probably have been bigger." This observation aligns with findings from the UK's competition watchdog, the Competition and Markets Authority.
A report published by the CMA in December revealed that profit margins for fuel retailers had increased over the previous year. The watchdog concluded that this rise could not be adequately explained by operating cost pressures, as claimed by supermarkets and other fuel retailers. Instead, the report signalled that competition within the sector remained "weak," suggesting that consumers might not be receiving the full benefit of wholesale price reductions.
Broader Implications for Households
The reduction in fuel costs represents a significant development for household finances across the UK. As one of the most visible and frequent expenses for many families, lower petrol prices can help alleviate broader cost-of-living pressures. The timing of this decrease, occurring at the start of the year, provides a measure of financial relief following the traditionally expensive holiday period.
While the current trend is positive, industry observers will be closely monitoring whether retailers continue to pass on savings from wholesale markets to consumers. The interplay between global oil prices, retailer margins, and competitive pressures will determine whether this period of lower fuel costs can be sustained in the coming months.
