Cheap fuel market may have bottomed out, says RAC
That’s the warning from the RAC following rises in the wholesale cost of both petrol and diesel.
Although motorists are currently benefiting from fuel prices below £1 a litre after oil reached a 12-year low of $26 on Wednesday 20 January, the barrel price has rebounded, finishing the month at $33.12, only $3 below where it started at $36.54.
RAC fuel spokesman Simon Williams said: “Motorists have seen petrol and diesel prices reach their lowest points since 2009. January saw the oil price go into free fall with talk of a barrel dropping to $20 and possibly even to $10, but since the low of $26 a barrel the market has started to creep back up. If this continues for a sustained period, wholesale costs will rise further which will in turn lead to pump price increases.
“However, the oil market is notoriously volatile, even in more stable economic times, so it’s still possible that the price could drop back again. And, even if there is a rise in the oil price, it seems unlikely that it will be drastic as OPEC seems set to continue producing more oil than is demanded to retain its market share. While there has been talk of a production cut, the market has yet to see evidence of this.
“The other factor which is not helping the situation from a motorist’s perspective is the fact that the pound has weakened significantly against the dollar from $1.47 at the beginning of January to $1.42 by the end. This has undermined some of the benefit of the falling oil price and, with oil traded in dollars, this could prove to be even more harmful if the pound continues to lose value against the dollar while the oil price goes up.”
Latest HMRC data for December 2015 shows combined sales of petrol and diesel were 1.8% down on November at 3.938bn litres but 0.4% up on December 2014.