20 October 2016

Fleet fuel bills to escalate as Sterling slump sparks possible 5p per litre rise

Sharp falls in the value of Sterling in recent weeks could trigger a rise in fuel prices of perhaps 5p per litre before the end of October, according to the Petrol Retailers' Association (PRA) and RAC.

Brian Madderson, Chairman of the PRA, forecasted a rise of 4–5p per litre by the end of the month, while motoring organisation RAC predicted a more conservative 3p per litre increase.

Mr Madderson said: ‘The double impact of the pound weakening against the US$ and global oil prices strengthening will cause pump prices to move sharply upwards.

‘The pound has now fallen by more than 15% to $1.24 since the pre-Brexit level of $1.47 and dropped even more alarmingly last week to just $1.15 in the ‘flash’ trading which started in Asian markets. Fortunately it recovered quickly but there are City analysts talking about even lower levels to come including parity with the US$.

‘At the same time, renewed talks among OPEC members trying to curb oil production has led to a hardening of global oil prices, with Brent Crude passing the psychological barrier of $50 a barrel.

‘As a result, wholesale costs to retailers have increased by over 6p per litre for petrol and 7p per litre for diesel in the last few weeks, whereas the UK average pump prices have moved up by less than 2p per litre for both grades over the same time period.

‘Thus motorists can expect increases of up to 4p or 5p per litre by the end of the month unless there are favourable corrections to the exchange rate and to global oil prices.’

RAC fuel spokesman Simon Williams said: ‘We’re likely to see the price of both petrol and diesel increase by around 3p a litre in the next fortnight. With the pound now worth so much less, there can be no other outcome than an unwelcome increase at the pumps.’

Average UK pump prices are currently 114.17p per litre for unleaded petrol and 115.73p per litre for diesel, according to website petrolprice.com.

The PRA has written to Chancellor of the Exchequer Philip Hammond calling on the government to support the economy in the face of such pump price increases by reducing Excise Duty in his November 23 Autumn Statement from 57.95p per litre to 55p per litre.

Mr Madderson said: ‘This would be an extremely popular and valuable contribution to ensuring consumer spending does not start to fall away and damage business prospects as the new government grapples with the aftermath of Brexit.’