Petrol price war

There is a new spurt in the race between supermarkets to cut fuel prices.

Asda has announced another 2p cut in the cost of unleaded petrol, which falls to 105.7p a litre from tomorrow -- after a similar cut last week.

Tesco followed with a promise that its petrol and diesel prices would drop by 2p a litre this afternoon.

Meanwhile the price of Brent crude oil slipped below $55 in world markets.

There are predictions that some buyers will be able to fill up for £1 a litre or less within the next couple of weeks.

Petrol down, gas up

It's a puzzle for anyone used to seeing prices for the various types of energy we use moving backwards or forwards hand in hand.

The cost of filling up the car accelerated ahead but now it's gone into reverse. Well, slightly, by 5 and a half pence a litre.

But the gas price bubble just seems to grow bigger and bigger. More than 8% bigger with British Gas's latest price increase.

One explanation is that petrol prices are affected by movements in the dollar/pound exchange rate, because crude oil and refined petrol are both priced in dollars.

The pound has enjoyed a significant recovery against the dollar in recent months, jumping from about $1.50 in value to around $1.60.

So while crude oil hasn't moved much in world markets, the cost to us in the UK has gone down.

Gas, on the other hand, is traded in sterling in the UK. There is less of the currency effect.

Not everyone in the energy market believes there has been enough of a rise to justify the price increase.

But British Gas says the cost of getting hold of gas and electricity accounts for a third of the jump in bills.

Will the petrol drop compensate for the gas hike?

If you fill up the car once a week, you are likely to gain more than you lose.

However, occasional drivers will still have cause to shiver from this week's energy news.

The petrol benefit will be outweighed by the cost of keeping warm.

Some of your responses on twitter:

@immaggi

Shhh, don't say it out loud or they'll hike the petrol up too!

@seeperry

Lack of gas storage is a partial explanation.

@GoodfishLtd

Because #Milliband warned the #energy companies that #Labour would cap their charges, so they're all rushing to the counter now!

‏@graemeburton

real-reason-why-energy-prices-are-spiralling-out-control Basically, the reason is policies intro by @Ed_Miliband that the coalition won't reverse.

@Shinsei1967

Petrol Fuel Duty frozen and petrol co's don't need tens of billions of new investment in plant and distribution.

@obotheclown2m

different raw materials. Duh.

Should petrol be cheaper?

The price of Brent crude oil, which is followed as a benchmark across the world, was slipping closer to $100 today.

The cost of a barrel of crude for delivery in November (if you want it on your doorstep) reached a low of $100.34.

But what about the cost of fuel to fill up our cars?

The latest average price for unleaded petrol (from petrolprices.com) is 135.03p, while diesel is 139.72 a litre.

If you think that is high, it might stoke your anger to look back at fuel prices in February, the last time Brent actually closed a trading day below $100.

The average price reported by the AA for February was 128.88p for unleaded and 132.8p for diesel.

So today we are paying around 7p extra per litre.

Ouch! Fuel prices still hurting...

Some people are surprised to find that different petrol stations charge different prices. It's true!

And some people pay more than they need to to fill up the car, just because it's such a fag to go from station to station.

But it does pay to shop around. Over Easter I replenished the car at a well known supermarket for 138p per litre of diesel.

Then I found myself in rural Wales, paying 144p. That's nearly £4 more for my tank.

Petrolprices.com gives you an idea, for free, of what's available in your area. In these volatile times, it's easy to lose track of what a keen price might be.

How high have you seen prices go? And any tips on how to deal with it?

How does inflation hurt us?

Inflation has fallen to 4%, but it's still high and eating up our ability to afford what we need.

This is what drivers at a petrol station in Wednesbury in the West Midlands had to say about it:

"You ain't got the money to spend on anything else because you got to keep mobile to keep your job."

"It's costing me twice as much just to get to work, but you don't have increases in your wages or anything, so it's really hitting me in the pocket."

"I haven't really got that much spare cash to do anything else. Holidays go out the window and it's really difficult."

And here's a thought from a pensioner, surviving on a fixed income, who's been hit by the rising cost of fuel, heating and food:

"Even though I have a good police pension, and my wife has a small pension, it's being eaten into by the rising costs. So we're having to go to savings and of course you don't get any interest on the savings. So that's not building, it's being eaten away."

No wonder the British Retail Consortium has just reported the biggest monthly fall in sales since it started collecting the stats.

Shoppers are reluctant to borrow. They're paying back debts if they can.

So unless they dip further into savings, High Streets could be in for a difficult summer.

Brace! Brace! Tax impact coming

Whatever happens in the Budget in a fortnight's time, plenty of tax and benefit changes are already set to be implemented in April. Tick them off as they arrive...

National Insurance. Employees pay 12%, an extra 1%.

Threshold for 40% tax. Reduced from £43,875 to £42,475, dragging 750,000 onto the higher rate.

Duty on alcohol. Up by inflation plus 2%. Possible 5p on a pint.

Tax credits. Faster reduction as earnings rise.

Benefits and tax credits increased by CPI not the higher RPI.

Baby element of Child Tax Credit, worth £545, is removed.

£500 Sure Start maternity grant restricted to one child.

5% stamp duty on £1m homes.

Inheritance tax threshold frozen at £325,000.

Child benefit rates frozen.

Fuel duty, the one to watch in the Budget.
Rise of inflation +1% is pencilled in. But expect some or all of it to be postponed.

Could unleaded get to £1.50 a litre?

There's been wild talk today about the price oil leaping to $150 a barrel as a result of the terrible events in Libya and problems elsewhere.

That still looks far off, but what is the connection between the price of crude oil and the the cost of filling up with petrol or diesel in the UK?

Unleaded is at a record 128.97p and diesel at a record 134.34p and they're rising.

As a ready reckoner, assuming that exchange rates remain stable, some observers would pencil in a one penny rise in the price of fuel for each $2 rise in the price of crude.

So the current price of $110 for a barrel of Brent crude could already presage a rise in the price of petrol of several pence.

At the same time the Petrol Retailers' Association warns that duty increases in the Budget, in March, could add another 5p.

What happens in the Budget is a moot point at the moment, but that could take us close to 140p for a litre of petrol.

And if crude oil puts on another $30 or more, then 150p a litre comes in sight.

As I say, this scenario still seems far off, but it's scary and there seems little doubt that our fuel prices will rise higher even if the price of crude stays where it is.