Fuel prices drop to below £1 a litre - how low can they go?

The pump price for diesel dropped below £1 for the first time in several years - and in some cases is cheaper than unleaded petrol.

And there are high hopes the cost of driving will go even lower, with fuel prices estimated to go under 90p later this year.

Diesel was being sold at 99.7p a litre at Morrisons, in Taunton, on Tuesday - less than the 99.9p for unleaded - while Sainsbury's was advertising both at 99.9p.

That's a huge saving since fuel peaked at £1.42 a litre in April 2012 and the move has been welcomed by businesses, organisations and individuals.

The fall in the cost of filling up our tanks is down to the collapse in the global price of crude oil due to a glut in production in the US and the Middle East and a slowing of major economies like China.

RAC fuel watch spokesman Pete Williams said: "Diesel drivers will clearly welcome this move by the big supermarkets, although it would be fair to say it has been slow in coming.

"The focus has been on the price of petrol but, with more diesel sold in the UK, the retailers should be more transparent and reflect the savings they are making in the wholesale price more swiftly at the pump."

But while motorists are smiling, the RAC Foundation questions why the lower prices have taken so long to filter through to the pumps.

Director Steve Gooding said: "It seems the January sales are extending beyond the high street to garage forecourts.

"The question is, why haven't we seen these bargains sooner and more widely?

"After all, the wholesale price of diesel has been below that of petrol since early December, yet the story at the pumps has been the opposite with diesel 3p or 4p a litre higher throughout that period.

"More generally, low pump prices are a product of a barrel of oil changing hands for less than a third of the price it did 18 months ago."

So, are fuel prices set to go down still further?

An AA spokesman said: "The lowest retailers could go today if oil fell to $20 a barrel - (it is currently $33.05) - is just under 90p a litre. Any less and they'd be giving it away."

Morrisons has pledged to keep dropping the cost of motoring if oil becomes even cheaper - and shoppers will also benefit with smaller grocery bills.

A company spokesman said: "If oil prices continue to fall, then we'll continue to lead on cutting fuel prices.

"Low oil prices also mean we make savings on our fleet of trucks, our energy bills, packaging and many other costs and this will be passed on to customers as we carry on cutting food prices."

Industry expert John Hall, of Alfa Energy, said: "There's nothing left to restrain prices.

"Petrol prices are likely to keep falling, so it's good news for motorists."

But there is likely to be a limit on how far price cuts can go as almost three-quarters of what pay for fuel goes to the Treasury in tax, with the rest covering production, refinery costs, distribution and retailer margins.

THE RETAILER.

Mark Raisey, director of Hatchers department store, in Taunton.

"Our suppliers are quick enough to put the prices up and blame it on increases in fuel costs, but there's no sign whatsoever of any lowering of prices now when fuel has come down by about a third in the last six months.

"I wouldn't be surprised if they put their prices up if and when fuel becomes more expensive again."

THE BUSINESSWOMAN/COMMUTER.

Jane Cowling, owner of Eden Wedding Florist and Flower School, in Taunton.

"It's great news and is making a big difference to me.

"It makes a big impact when I'm delivering for weddings - there's a noticeable difference in my overheads and it's saving me hundreds of pounds a year.

"I really notice it driving to work - I do a 25-mile round trip from Chipstable to Taunton five or six times a week."

THE PENSIONER.

Graham Stanbridge, from Williton.

"I drive about 6,000 a year, coming into Taunton monthly and regularly going to the Midlands.

"My car's diesel and last time I filled up it was £1.01, so hearing it's now below £1 makes a considerable difference.

"It's particularly good news because as a pensioner I'm on a fixed income."

THE AMBULANCE SERVICE.

South Western Ambulance Service’s head of fleet and logistics Carolyn Bill.

“The number of miles our vehicles travel can vary greatly, but is closely linked with the demand for our services.

"The trust used more than five million litres of fuel in 2014-15 and our activity has continued to rise throughout 2015-16.

"Therefore the drop in fuel costs is a very welcome one as it will enable us to remain within budget.”

THE COUNCIL.

Somerset County Council leader Cllr John Osman.

"We welcome falling fuel prices and anything that helps make life a little bit easier for Somerset residents and businesses.

"It means a bit more money in the pocket which should in turn help boost the local economy.

"As a county council we also benefit from lower fuel prices, but these are marginal compared with rising demand for our services (£5million for 2016/17), inflation pressures (£3.5m for 2016/17) and reduced funding from Central Government (£63m by 2019/20).”