Supermarkets in fuel price war

Wednesday 14 January 2015

The big four supermarkets are all cutting the price of their fuel again.

Asda, Morrisons, Sainsbury's and Tesco are all knocking a further 2p off their petrol and diesel. The Tesco cut takes effect from this afternoon, while the reductions by the other three companies will kick in tomorrow.

For Asda customers, the latest reduction means they will pay no more than 103.7p a litre on petrol, with diesel at 110.7p a litre.

The reductions have come after it was revealed that a Birmingham service station had cut the price of its petrol to 99.7p a litre.

The RAC, which has been forecasting that petrol prices would dip below the £1-a-litre mark, welcomed the news of the Birmingham service station price cut. But the AA said that, although welcome, the Birmingham reduction "appears to be a publicity stunt rather than a reflection of general pump prices".

AA president Edmund King said: "There remains a postcode lottery out there when it comes to fuel prices. Drivers in rural areas are still paying much more than the £1.09 average price and in some places £1.18. It will still take some time to get down to an average of £1 per litre, particularly as 70% of the pump price is tax (57.95p duty and 18.3p VAT)."

The below-£1 petrol is being sold at the Harvest Energy service station in Birmingham.

According to its owner Velautham Sarveswaran, the latest price cut is down to "a great deal" with his supplier.

Mr Sarveswaran said: "It's a great feeling for me to be able to give cheap prices to my customers. I like making them happy."

RAC fuel spokesman Simon Williams said the Birmingham factor was "clearly having a ripple effect on the supermarkets".

He said: "We are surely only weeks away from the milestone price of £1 a litre being a common sight at petrol stations up and down the country."

The latest forecourt cuts come with Brent crude oil trading at about 48 US dollars a barrel, the lowest level since April 2009.

US bank Goldman Sachs has lowered its forecast to 42 US dollars a barrel and said prices might remain at this level for some months due to the supply glut caused by investment in US shale wells.

The price slump continued to have an impact on FTSE 100 oil stocks, with BP shares down 2% in the session and by more than a fifth in the last year.