The price of oil has plunged in recent weeks, culminating in what the RAC is calling “the biggest single daily drop in the oil price in 20 years”.
Fuel prices have been dropping, but there’s the potential for even more savings. The RAC says that UK motorists should not be content with the current savings. “Petrol and diesel are still overpriced despite two rounds of cuts from the supermarkets last month”.
That’s how RAC fuel spokesman Simon Williams concluded his opening statement on what the plummeting price of oil should mean for UK drivers. He added: “The last time we saw the wholesale price of petrol this low was in March 2016 which led to an average price of 106p a litre two weeks later. That’s nearly 17p a litre below the current average of 122.85p”.
In the past, single-figure movements in per-litre prices were headline-worthy. Now, if fuel prices matched those of 2016, which were a response to oil prices the same as where they’re at today, serious savings could be made. Fifty-five litres of petrol could be £9.35 cheaper than the current average price.
The RAC is realistic, however. Such a drop based on a one-day fall in oil prices would be wishful thinking. However, motorists “ought to see at least 10p a litre coming off the price of unleaded in the next fortnight”. This “would produce an average of 113p – a price last seen in October 2016”.
“We strongly urge every fuel retailer – large and small – to pass on these savings as soon as possible. But we expect the big supermarkets who sell the lion’s share of fuel to lead the way with some swift and significant cuts in the next few days.”
Could the Chancellor see an opportunity for a cash grab?
It’s uncertain how the Chancellor will respond in the forthcoming Budget. Williams continued: “We strongly hope he does not see this as an opportunity to hike fuel duty given the current volatility of the oil market”.
Why has oil dropped in price?
Coronavirus has caused a slump in demand, with travel restrictions across the world. That’s been the cause of the overall drop over the last few weeks. We can thank Russia for the latest single-day drop, however.
“Ironically, the latest oil price collapse has been brought on by OPEC and its allies, principally Russia, failing to agree another round of production cuts to prop up the barrel price in the wake of the slump caused by the coronavirus impacting global demand,” Williams explained.
“Russia appears to want to keep the price of oil low to hurt the US’s shale oil production, while Saudi Arabia seems to want to make a point to Russia that it can withstand an even lower oil price as its cost of production is the lowest in the world.”