Supermarket chain Asda lowered its petrol prices today, sparking a new price war on the forecourts.

Asda is cutting 1p off a litre of petrol, which will now cost no more than 111.9p a litre at its 180 filling stations.

The company is also knocking 2p a litre off diesel, which will now be no more than 114.9p a litre.

The move is a welcome break for motorists, who have been warned that prices are likely to rise to a record 125.9p a litre by next year.

Today’s reduction comes as Asda’s monthly income tracker showed that family spending power was down 4.2 per cent year on year, equating to a £7 fall in disposable income each week.

Its research shows that UK families could face the lowest amount of disposable income in the final quarter of 2010 for two years.

Asda president and chief executive Andy Clarke said: “These are increasingly uncertain times for millions of families across the UK. We are shopkeepers not economists, but in this age of austerity we know the pennywise will thrive.”

The firm sparked a fuel price war this year when it cut petrol prices by 2p a litre, making petrol 115.9p a litre and diesel 118.9p a litre. Tesco and other supermarkets are likely to follow today’s rise, along with major petrol companies.

Sainsbury in Wednesfield was today selling unleaded at 112.9 and diesel 115.9. But the average price of fuel in the West Midlands was today 114.9p for unleaded and 116.9p for diesel.

Asda’s cut came as RMI Independent Petrol Retailers Association, which represents two-thirds of the country’s 9,000 forecourt sites, wrote to the Prime Minister asking him to set up a working party of government and industry representatives to tackle the issue of petrol prices.

It warned that looming fuel duty and VAT increases will add 5p a litre to pump prices, even without the recent rise in the price of crude oil.