Petrol costs fell again last month fall but AA warns price will lurch thanks to financial speculators
Petrol and diesel prices continued to fall in the last month but costs remain ‘fragile’ as traders and speculators exert increasing influence over the fuel market, according to the AA.
The average price of petrol at the forecourt fell from 136.89p a litre in mid-April to 133.35p in mid-May, the motoring organisation said in its latest monthly fuel report.
Prices had hit a year high of just over 140p a litre at the start of March, having started the year at around 132p.
Petrol prices: The cost of unleaded and diesel has tumbled since it reached a year high at the start of MarchDiesel, on average, now costs 138.17p a litre, down from 141.76p a month ago. It also reached a year high on March 4 of almost 146.5p a litre, having started the year at around 140p.
Prices are roughly 5p a litre cheaper than this time last year. June and July 2012 saw prices tumble to a year low of 132.18p. A similar 5p fall in the next two months would see unleaded prices fall under the 130p a litre mark for the first time since early 2011.
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But the AA said that this week's International Energy Agency (IEA) warning that traders and speculators were taking control of the European fuel market meant that more and ups and downs in prices could be expected.
On Tuesday, the IEA said: 'Increased European reliance on trading houses and third-party suppliers may also leave a growing share of European supply in the hands of market participants with a different set of incentives than those of refiners.
'Whereas refiners have a clear interest in maximising production and plant utilisation, traders have a different mix of fixed assets and their strategy and market behaviour thus tend to respond to other signals, such as arbitrage opportunities or market volatility.'
The AA says it welcomes investigations on both sides of the Atlantic into pricing activities in the oil and road fuel wholesale markets, hoping that they will expose the level of contradiction between market speculation and the fundamentals of supply and demand.
These investigations are a significant development, perhaps a turning point, in getting to the bottom of what drives the price of fuel on UK forecourts, the motoring organisation says.
The drop in pump prices in the last few weeks follows a series of supermarket price reductions, led by competitive independents and other non-supermarket retailers, which have now reduced the cost of petrol to as low as 128p/129p in East London.
The AA said: ‘However, wholesale price movements indicate the fragility of the price falls as petrol costs have rebounded, fallen away again and then bounced back over the past three weeks.’
Averaging 132.8p a litre, Yorkshire and Humberside has resumed its position as the cheapest region in the UK for petrol.
Northern Ireland is the most expensive at 135.1p and also for diesel, at 139.3p a litre. This is 2p more than the cheapest diesel area - Yorkshire and Humberside at 137.3p.
Paul Watters, head of AA public affairs, said: ‘Three times in the past 12 months, drivers have been hammered by £4-£5 hikes in the cost of a tank of petrol.
‘It is clear that, if petrol and diesel wholesale price movements were transparent, families and businesses would have 10 to 14 days' notice of the next price shock - and hopefully the reason for it.
‘The IEA report suggests that fuel prices will be increasingly subjected to speculation on the part of those who look for inflated short-term profit rather than those players looking to strike a balance between fair profit and supply and demand - without destroying their consumer market, refining capacity and the UK economy.
‘We have seen petrol consumption in the UK fall to record lows this year. As many as 69 per cent of AA members are cutting back on car use, other spending or both, and 86 per cent of US drivers are using their cars less. The warning signs couldn't be any clearer.’
