The price of petrol and diesel in the UK is falling at the fastest pace this year, with households paying about £4 less to fill up a family car than they did a month ago.
Analysis from the RAC found that the average price of a litre of unleaded petrol in the UK was now just above 136.15p, down 7p from the 142.86p recorded last month. Diesel now costs almost 141p a litre, compared with just under 148p a month ago.
It marks the biggest drop in petrol and diesel prices since December last year, when prices also fell by 7p a litre.
The RAC said drivers should expect further drops and predicts that petrol could drop to 132p a litre, and diesel to 138p a litre, in the next fortnight, which would mark a three-year low for both fuels.
The RAC said the reason for the fall was because of lower global demand for oil, which brought the price of a barrel down to $73 last week. A stronger pound against the dollar, the currency oil is traded in, also contributed.
It marks a significant turnaround since April, when typical petrol prices hit 150.1p and diesel rose to 158.3p.
Earlier this week, the Office for National Statistics pointed to the drop in fuel costs as being a big reason that headline inflation remained at 2.2% for August.
The RAC’s lead spokesperson on fuel, Simon Williams, said: “It’s really encouraging to see pump prices coming down so rapidly, which we know is as good for drivers’ wallets as it is for keeping the headline level of inflation in check.
“Of course, global oil prices and even the strength of the pound can fluctuate wildly, and that’s something completely out of drivers’ control. But with the cost of filling up making up a sizeable chunk of many households’ overall monthly spending, it makes sense to stretch every pound spent on fuel as far as possible.”
The RAC told drivers earlier this month to expect a fuel duty rise as part of Rachel Reeves’s budget speech next month as she looks to close what Labour calls a £22bn hole in the public finances.
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The then chancellor, Rishi Sunak, cut fuel duty by 5p a litre in March 2022 after Russia’s invasion of Ukraine pushed up energy costs. His successor could, however, scrap the cut, which would lift fuel duty back up to 58p a litre.
Williams said at the time that the 5p discount was losing the Treasury £2bn a year and would probably be removed.
“We’d normally be against any increase in duty, but we’ve long been saying drivers haven’t been benefiting from the current discount due to much higher than average retailer margins,” he said.
“As more and more EVs come on to the roads the government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT.”