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Motorists all over the country were breathing a sigh of relief last week as the price of crude oil fell sharply, but that initial joy has been followed by disappointment as the dip in price is struggling to trickle through to the forecourt.
The price of brent crude oil has been steadily falling since early April, but despite the fact that oil is now nearly a fifth cheaper than it was four months ago, the price of unleaded petrol has in fact gone up by 1.8%.
The average price of unleaded petrol is now less than a penny away from the record high of 137.43p, which was set back in May. While some supermarkets have started to cut a penny or two off their petrol prices this week, some might argue that it isn’t a true reflection of the price drop in crude oil.
Now some motorists are wondering why forecourts are happy to implement price increases when the price of crude oil goes up, but are less willing to lower prices when costs drop. Adam Scorer, director of external affairs at Consumer Focus, told the Guardian: “Consumers will question whether they’re getting a fair deal if prices don’t come down as quickly when costs fall as they go up when costs rise.”
However, petrol forecourts have been defending their prices, claiming that other factors such as the exchange rate, fuel duty and VAT also have an impact on their pricing.
In fact, the price of raw crude oil only accounts for 30% of the price you pay. 60% of the cost is determined by fuel duty and VAT, whereas a further 10% covers other factors like delivery charges, marketing and profit margins.
In addition, as crude oil barrels are priced in dollars, the falling value of the pound against the dollar has also countered the impact of falling crude oil prices.
Price drops are hopefully beginning to filter though as Asda, Morrisons and Tesco have taken 2p off their forecourt prices this week. Reductions should be seen more widely in forecourts over the next month, but the price of petrol at the pump is unlikely to drop at the same rate of the price of raw crude oil.
How are you dealing with the rising costs of motoring? Let us know your thoughts in the comments section below!
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