The impact of Coronavirus on fuel prices
Fluctuations in the price of crude oil are having a significant impact on petrol and diesel prices as both
drop towards £1 per litre. The current coronavirus situation is responsible for this drop with some
predicting that the price of petrol and diesel could soon fall below £1 per litre. RAC Fuel Watch have
released their latest findings which show unleaded petrol is currently at 112.56 pence per litre and
diesel is at 117.18 pence per litre. This stems from crude oil itself being at a particularly low £24 per
A spokesperson for the RAC, Simon Williams, went so far as to comment that wholesale fuel prices
have now dropped so significantly that there is still room for forecourts to cut their prices further.
Morrisons, for example, have already dropped their prices significantly by 8p per litre, while Asda has
gone even further and dropped their prices by 12p per litre. Williams did, however, add that such price
cuts could have a detrimental impact on small forecourts that do not have a supermarket associated
How is UK fuel priced?
UK fuel prices are typically broken into three areas – taxes, wholesale costs and fuel company costs.
The Government will take approximately 65 % of the cost via fuel duty and VAT. The wholesale costs
are the costs associated with the fuel and these would include fuel prices themselves, currency rates
and would also be influenced by domestic demand. The fuel companies get the remainder which is
generally the smallest portion of the fuel cost; forecourt stations typically taking profits of between just
2p and 5p per litre, or even less where there is tough competition.
Supermarkets versus Independent Forecourts
The supermarket industry is aggressive and competitive. Therefore, with the likes of Asda, Tesco and
Sainsburys all selling fuel, it is no surprise fuel prices are also very competitive. The more customers
visit a supermarket’s fuel pumps, the more likely it is these customers will shop in their stores,
meaning that supermarkets are often in a race to reduce their fuel prices below that of their
competitors. This, in turn, puts huge pressure on smaller independent forecourts who are forced to cut
their own margins to compete with the supermarket giants.
Why do fuel prices differ?
People often wonder why diesel is more expensive than petrol. One answer is there is a lack of diesel
refineries here in the UK and so supply isn’t as high as it is for petrol. As a result, the UK has to import
more diesel than petrol which in turn increases diesel prices. Another reason diesel prices are often
higher has to do with the USA. Once winter hits there Americans don’t travel as much which results in
them spending less on petrol. Petrol retailers then sell their surplus to the UK. You might think the
same happens with diesel but, in fact, diesel is used as a heating fuel across much of Europe to heat
homes and so diesel isn’t sold as surplus to the UK for vehicle fuel.
How far the price of fuel continues to drop has yet to be seen. However, with the coronavirus situation
looking likely to be with us for some time yet, it is fair to say we will continue to see prices falling.
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