Petrol and diesel prices edged up again through January but drivers are now starting to pay a fairer price as retailers absorb cost increases.

The RAC said February will be a big test of pricing transparency for retailers

Oil prices last month shot up from $79 a barrel at the start January to more than $92 at the end, new data from the RAC reveals.

This pushed up wholesale petrol and diesel prices by 4.9p and 3.6p a litre respectively.

But for drivers, the pump prices actually rose by less than a penny for each fuel as retailers absorbed the cost increases. The average cost of a litre of unleaded now stands at 146.45p and diesel at 149.81p.

Last month, the RAC warned that retailers’ resistance to cutting prices on the back of lower wholesale prices was “nothing short of scandalous”, after petrol fell by just 2p a litre, despite RAC analysis showing that average prices should have fallen by nearer 12p.

Its latest data now reveals that the average profit made by retailers on a litre of petrol stood at 11.4p for January. While it’s significantly higher than the long-term average of around 6p, it’s down from 16.4p in December and a “step in the right direction”, according to the RAC.

The average margin on a litre of diesel is now back to more normal levels at 8p, down from 12p in December.

RAC fuel spokesman Simon Williams said: “At long last, retailers appear to have heard our clarion calls for drivers to be charged a fairer price at the pumps – something that is so important as the effect of high inflation bites and households up and down the country brace themselves for what looks like an inevitable cost of living squeeze. On average, retailers are now making a more normal profit for each litre of fuel they sell than they did in December which makes today’s pump prices – although up slightly on December – more justified.”

The RAC has warned that “storm clouds are gathering” for fuel prices though and said February will be a big test of pricing transparency for retailers. With oil now having traded above $90 for a week – the highest price for more than seven years, wholesale fuel costs are once again increasing, which will undoubtedly lead to retailers putting up forecourt prices.

Williams added: “Our message to the biggest retailers, which lead the market, is to treat drivers with respect by fairly reflecting the movement in the wholesale fuel market and not taking overly high margins. If they were to increase their margin and hike prices beyond what’s justified it would be devasting for hard-pressed drivers.”