Further price cuts as cost of petrol falls by 10%

Petrol prices have fallen by up to 10 per cent since the Budget thanks to cuts in VAT and duty, a drop in the price of crude oil and the weakening US dollar.

Maxol became the latest supplier to announce a reduction yesterday, cutting the price of unleaded petrol by 5p a litre.

Statoil and Texaco both said they had introduced similar reductions last month, while Esso and Shell said they had lowered their prices by 10p since December 5th.

The reductions come as welcome news to motorists who saw petrol prices rise by 36 per cent between January 1999 and last December, according to figures from the Automobile Association. The price of home heating oil has also fallen on average by more than £20 on a tank of 1,000 litres.

As ever, however, there is widespread price variability. Suppliers have stressed that the prices they quote are recommended and that retailers are free to charge whatever they wish.

The AA's public affairs manager, Mr Conor Faughnan, said the cuts had "corrected prices down to a rational level" after two years of increases. "It looks as if oil prices are stabilising and the euro is improving against the dollar."

Between January 1999 and December 2000, average pump prices rose from 56p to 76.3p a litre for unleaded and 53p to 74.7p a litre for diesel.

Duty reductions in the Budget of 2.5p a litre on petrol and 6p a litre on diesel helped to lower average costs to 72.1p a litre and 69.3p a litre respectively. The reductions are due to a fall in international crude oil prices from $35 a barrel last October to $24 a barrel this month.

According to the latest AA estimates, average petrol prices have since fallen to 69p a litre for unleaded and 65p for diesel.

Esso said it lowered the price of unleaded by 2.3p on December 5th, the day before the Budget. Further reductions of 2.4p and 4.9p were introduced on December 7th and January 1st respectively. Shell said its prices dropped by 5.5p on December 7th and by a further 4.6p on January 1st, resulting in a saving of 45p a gallon.

A spokesman for Texaco said its prices fell by about 4p on December 18th and a further 0.6p this week. He noted, however, that some of the company's service stations had introduced even greater reductions and were charging up to 4.5p below the recommended retail price.

Statoil said it reduced its wholesale unleaded prices by 2p a litre at the beginning of last month and by a further 3.3p on December 23rd. An additional cut of 0.6p a litre was introduced this week in line with VAT reductions. Home heating oil prices have also been cut by Statoil by 3-4p a litre.

Mr Faughnan reiterated that drivers should shop around for the best value. "First, they should be price fussy and complain if prices are too high or go elsewhere.

"Second, they should buy petrol in units of litres rather than units of pounds. It just means looking at the other dial on the petrol pump but it should help to make people more price conscious. In short, he said, "think: 30 litres rather than £20".

By paying 5p less per litre on a 30-litre tank of fuel, a motorist will save £1.50. Despite this, said Mr Faughnan, "people have an extraordinary tolerance for price differentials."

A survey last August by the Director of Consumer Affairs showed some filling stations were charging almost 16 per cent more than others in their locality. In Mullingar, investigators found a price differential of 8p on a litre of unleaded.