Oil prices – and the feed through to what forecourts pay – has eased enough to warrant a cut in what motorists are charged at the pump, says the AA
Drivers are due a 4p a litre cut in petrol prices, motoring group the AA claims.
It says the wholesale element of fuel – or how much retailers pay – has eased enough to warrant a reduction at the pump.
The war in the Middle East triggered a surge in oil prices, but have come down from their peak.
The price of Brent crude jumped by almost 4% to over $98 a barrel on Thursday as cracks appeared already in the new two-week Middle East ceasefire, but remains a lot lower than the near $120 it hit in recent weeks.
According to the AA, the wholesale cost of petrol was at around the 67p a litre on Tuesday this week, then fell as low as 59.5p but has bounced back to 63p.
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It said: “It leaves a 4p-a-litre reduction in average pump prices still on the cards. Likewise, diesel costs had fallen from the 102p-a-litre mark to below 82p, but went back up to 87p on Thursday.
“That is still a 15% fall from the peak.”
Latest data shows average pump prices continue to rise, reaching 158.0p a litre for petrol and 190.8p a litre for diesel.
The AA said any reduction in fuel prices was unlikely by this weekend, but could happen next week.
Luke Bosdet, its spokesman on pump prices, said: “Based on the fuel industry’s rule of thumb of a 10 to 14-day lag between wholesale cost movements and those at the pump, drivers should expect prices on forecourts to level by next weekend and then fall – providing the ceasefire holds.”
Much will depend on events over the coming days, with little sign of Middle East tensions easing despite the tentative ceasefire. A wave of deadly missile attacks by Israel on Lebanon have thrown the pause into doubt.
“The chances of a meaningful reopening (of the Strait of Hormuz) any time soon look dim,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
The strait is a vital waterway connecting supplies from Gulf producers such as Iraq, Saudi Arabia, Kuwait and Qatar to global markets, and typically carries about 20% of global oil and gas flow.
Dan Coatsworth, head of markets at broker AJ Bell, said: “There is an air of renewed nervousness pervading financial markets after the euphoria which was initially prompted by the US-Iran ceasefire.
“This agreement already seems to be fraying at the edges – with continued strikes by Israel on Lebanon a key sticking point.
“With talks on a lasting deal yet to begin it’s understandable that investors are taking a circumspect view. There is still optimism that the fragile peace will hold but also a growing awareness that things won’t go back to a pre-war state in a hurry.
“The disruption and damage to infrastructure seen over recent weeks is likely to take months to unpick and the inflationary pressures unleashed by the conflict are only just beginning to feed into the wider economy. Even if energy prices eased significantly tomorrow, there is still likely to be a lasting impact.”
It comes as the International Monetary Fund is poised to slash its forecasts for the global economy because of the damage inflicted by the conflict.
“Had it not been for this shock, we would have been upgrading global growth,” said Kristalina Georgieva, the fund’s managing director.
