Record low oil prices drives cost of fuel down in August, says RAC
Prices at the pumps tumble as oil prices sink to record six-year low.
Record low oil prices have helped drag the average cost of fuel at the pumps down in August, according to the latest RAC Fuel Price Watch report.
Petrol fell by 4p for the month bringing the average cost to 112.42p a litre, while the price of diesel fell a further 5p a litre taking the average cost down to 110.4p.
The shift means motorists are now paying £2 less to fill up the average petrol family car and £2.60 less for the average diesel family car, than they were at the start of August.
Why have prices fallen?
The RAC says a "dramatic reduction" in the price of oil has helped drive prices down.
It reports a barrel of oil was consistently averaging $60 (£40) in the last few weeks of July. But this fell to under $50 (£33) a barrel at the beginning of August, where it stayed for the whole month, reaching a low point of $41.87 (£27) on 24th August.
According to the RAC world oil prices are now at their lowest since February 2009. It’s thought over-production and over-supply in August has led to the dramatic shift.
Diesel drivers have seen the most benefit this summer, paying £5.60 less than they were at the beginning of July, thanks largely to new supply from Saudi Arabia bringing wholesale prices down.
Petrol motorists though are only just seeing the drop in the price of oil feed into lower wholesale and retail prices.
What’s going to happen to fuel prices?
The RAC warns the good times may soon come to an end.
That’s because the Organisation of the Petroleum Exporting Countries (OPEC), which produces 40% of the world’s oil, have agreed to meet with other producers to discuss a ‘fair’ price for oil.
The cost of oil has already recovered from its record six-year low and a barrel is now trading around $48.
However, the RAC says given the oversupply of global oil, it’s unlikely prices at the pumps will return to highs seen in April 2012 of 142p a litre for petrol and 147p a litre for diesel for some time yet.
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