The RAC has called upon retailers to give in to their festive “goodwill”, and offer sub-£1 prices at the pump as they did last year.
Asda and Tesco have both already cut their fuel prices by 2 pence per litre, and Sainsbury ‘s have pledged to do the same.
A spokesman for the RAC said that “all we need is for the supermarkets to do the right thing and embrace the season of goodwill by passing on those savings at the pump to make Christmas that much cheaper for everyone.”
The average fuel prices will, if the 3 and 5 pence drops happen, fall to 103p for petrol and 104p for diesel which, while not quite under £1, is “a big step in the right direction” according to the RAC ‘s spokesman. The average price for fuel at the pump has not been under £1 since the Summer of 2009, said the RAC, but falling prices for oil per barrel should kickstart a price drop that make take us into that territory and indeed should do.
A couple of weeks ago, the RAC predicted that fuel prices would be dropping, citing steadily dropping wholesale prices. At the time, average prices at the pump were at 107p per litre. And indeed, RAC ‘s chief engineer David Bizley said that “there ‘s typically about two weeks lag in the system. So there ‘s a very good chance that within a few weeks people will be selling fuel at £1.01, and then the temptation to move that extra penny or so will be unavoidable.”
Since 2014, prices per barrel for Brent crude oil have gone down by more than $75 dollars and RAC ‘s spokesman Simon Williams has said that if these savings are not passed on, then the retailers will be “giving themselves an unpopular Christmas boost to profits by pocketing the extra margin when they should really be passing this on to their customers instead.”
Now, some oil producers are preparing themselves for the possibility for a further drop to $20 per barrel in the not-too-distant future.
Countries like Russia and Saudi Arabia, the two largest oil producers in the world, are at risk as they both increased their government spending budgets back when oil prices sat at over £100 a barrel. Now that prices have dropped to $40, they are already having to make cuts and, as Russia ‘s deputy finance minister has said, if they drop to $20, “we will need to do additional cuts.”
Traditionally, when oil prices dip drastically, oil cartel OPEC starts to cut down on production to bring prices back up. But there was no sign of this happening when they met in Austria last week.
Despite reliance on an oil based economy, Saud Arabia are still stubbornly refusing to bring up costs that would increase their own revenue, instead focussing on keeping prices low enough to compete with US produce shale gas.
Last week, Saudi Arabia came under criticism at the Paris climate change summit for refusing to agree to regular carbon reviews and emission reduction targets, claiming that as a country, “we are too poor,” despite being the 15th largest economy in the world.