Low oil price sees sharpest drop in fuel costs for 12 years

UK petrol prices fell by their largest margin in 12 years during March, new figures have shown.

The price of oil was $50 a barrel at the start of the month, before dropping by 66 per cent to $18 by the end of March – its lowest level in 18 years. The drop was fuelled by the fall in demand due to the coronavirus outbreak, combined with a huge surplus of oil as producing nations struggle to agree a deal on how to drop supply.

As a result, more than 9p came off the price of a litre of unleaded according to the RAC, with average prices dropping from 122.72p to 113.54p a litre. Diesel also fell, going from 125.7p to 117.8p a litre. It represents the largest single-month reduction in fuel prices since 2008, and resulted in the cost of filling an average 55-litre car dropping by £5.05 for unleaded and £4.35 for diesel.

Simon Williams, RAC fuel spokesman, said: “February was a pretty extraordinary month for fuel price reductions, but nothing prepared anyone for what would happen in March as the impact of the coronavirus began to be felt. An already-oversupplied oil market was suddenly faced with an enormous shortage in demand as worldwide travel ground to a halt.

“While the impact of the coronavirus on travel and oil demand continues, there are early signs that the oil price won’t stay as low as it has been in recent days for very much longer. The price war that has been raging between two big oil producing nations, Saudi Arabia and Russia, may be reaching its end if recent statements from the United States are correct – but it is very early days and something we will keep a close eye on.”

The RAC says that prices could fall further in April, given the reduction in the cost of wholesale petrol and diesel – down 16p and 10.5p respectively – which could see retailers push down consumer prices even further.