Regional petrol price differences

Published on Friday, 16 November 2012 10:11
Posted by Vicki Mitchem

Anyone who has been asleep or abroad for the past six months and bought petrol in the past few days should be forgiven for thinking that the UK's rip-off pump prices had been frozen in time, the latest AA Fuel Price Report concludes.

In the past month, the average UK petrol price has fallen 3.87p a litre, from 138.95p to 135.08. Diesel prices are down 1.85p a litre, from 143.74 to 141.89. Although drivers welcome the relief, there is much more in the pipeline.

AA research reveals that, despite the threat of an Office of Fair Trading investigation of the road fuel market, conditions that led to drivers and businesses being short-changed at the pump in the spring have happened again.

Pump v wholesale prices

Across Europe, the wholesale price of petrol has fallen from around 54p a litre at the beginning of October to around 45p by the end. With VAT, this should have knocked average UK petrol prices down by 10p to 11p a litre. However, after reaching a plateau of around 139p a litre in mid October, UK petrol pump prices were down by less than 4p a litre by the start of this week.

Six months ago, the value of wholesale petrol across Europe had fallen $220 a tonne between mid April and the first week of May, the equivalent of 11p-12p a litre at the pump with VAT. However, by mid May, only 4p of the saving had been passed on at the pump.

The AA is now able to match movements of UK wholesale prices for petrol with ethanol and diesel with biofuel against price movements at the pump. These show that, since early October, the wholesale price of unleaded with ethanol has fallen from around 53p a litre to around 45p at the start of November - equivalent with VAT to a 10p drop at the pump.

During the same period, the wholesale price of diesel with biofuel fell from around 56p a litre in early October to around 52p at the start of November – equivalent with VAT to a 5p a litre drop at the pump. However, average diesel pump prices have fallen only 1.85p a litre between mid October and mid November (changes in wholesale prices typically take 10-14 days to be reflected at the pump).

Price postcode lottery – 5p difference returns

In March, the difference in price for supermarket petrol in neighbouring towns reached a new high of 5p a litre, in particular Mansfield v New Ollerton / Newark, Dover v Canterbury, and Aylesbury v Milton Keynes.

On Monday, drivers in the New Ollerton/Newark area were once again paying 5p a litre more for supermarket petrol compared to 11 miles down the road in Mansfield – as were drivers in Dover compared to Canterbury 18 miles away. In Aylesbury, despite councillors complaining to their local supermarket, the price gap between the town and Milton Keynes had returned to 4p – 5p a litre on Monday.

Europe prices undercut UK's again

Last week, the average pre-tax price of petrol in Austria, Belgium, France, Germany, Italy, Holland and Spain had fallen 9% in three weeks (15 October – 5 November). In the UK, the average petrol price charged by retailers before tax had fallen 5.5% in the same period.

This echoes the three weeks between mid April and the first week of May when pre-tax petrol prices in those seven European countries fell an average of 6.10%, but only 3.16% in the UK.

Last week, despite the pound being 15% stronger than the euro when trading in dollar-valued wholesale markets, the UK's pre-tax petrol pump price was undercut by Austria, France, Germany and Spain.

Speculators create 2012's second petrol price bubble

Having driven European wholesale petrol prices to record levels in April ($1221 a tonne), stock market speculation surged the market again in late September ($1187).

Unlike the spring, where speculation focused on closed refineries and an impending US motoring season, market gambling on the impact of refinery fires and maintenance schedules fuelled a second price surge.

Just like the spring, refiners increased production to capitalise on the bloated wholesale prices. Some even delayed the maintenance supposedly triggering the price surge to take advantage of the higher profit margins.

A fortnight ago, Exxon reported a 78% increase in earnings from refining in the US and 127% in non-US refining. Other refiners have reported record earnings during the third quarter.

And, just like the spring, drivers in critical markets like the US cut back, the price bubble burst and wholesale prices fell off the cliff.


"It should beggar belief that, after the trauma of high fuel prices in the spring, the same thing should happen again six months later. But we are talking about the fuel industry. Even the Petrol Retailers Association can see the sensitivity of the situation, issuing a press release last week trying to point the blame for high fuel prices elsewhere but rightly pointing out that many of its members are charging less than supermarkets," says Edmund King, the AA's president.

"Recent political focus has been on the 3.02p-a-litre fuel duty increase, scheduled for 1 January, either ignoring or unaware that duty's ugly sister, unrestrained wholesale prices, has been running rampant in the fuel market.

"The Government momentarily had a grip of this monster when the previous Transport Secretary called in the industry to agree wholesale price transparency. This initiative stalled when the Office of Fair Trading called for information on road fuel pricing – to which the industry has responded by pumping up wholesale prices and then not passing on cost savings in a timely fashion.

"The average UK domestic energy bill is £1,252, but the cost of fuel for the average car consuming 1200 litres a year is over £1500. This week the Government said it was going to tackle high gas and electricity bills, yet lets drivers and businesses down by not reacting swiftly to runaway wholesale and pump prices."


Regionally, reductions in the price of petrol have favoured the North and the Midlands, with most areas enjoying cuts over the past month of at least 4p a litre. In East Anglia and the heavily-populated South, the cut has ranged from 3.3p to 3.6p a litre. On average, the cheapest petrol is sold in Yorkshire and Humberside (134.3p) and the most expensive in the South East (135.7).

Averaging 141.0p a litre, Yorkshire and Humberside sells the cheapest diesel and, at 142.6p, Northern Ireland is the most expensive for it.

Source: ©AA

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