Motorists are poised to benefit from lower prices at the pump as the world’s biggest oil exporting country ramps up production.
Brent crude fell more than 2pc to less than $72 a barrel on Thursday after reports suggested Saudi Arabia was ready to scrap its $100 price target for crude oil in preparation for increasing output.
It is beyond the oil that fell from more than $90 per barrel in the spring, with the driver has seen an improvement when filling up the car compared to earlier in the year.
Saudi Arabia’s plans, reported by the Financial Times, show that the country will increase production even if it means lower production times.
A liter of petrol has fallen on average to more than £1.35, according to figures from the Department of Energy Security and Net Zero, down from £1.55 a year ago and peaking at more than £1.90 in 2022.
Diesel costs an average of £1.40, down from £1.60 last September and a high of almost £2 after Vladimir Putin’s invasion of Ukraine.
Simon Williams, at the RAC, said the further fall in oil prices means drivers can expect further cuts to fuel costs at the pump in the coming weeks.
He added: “Relatively low oil prices, due to lower global demand, and a relatively strong pound are two factors that have contributed to lower prices. We believe there is room for pump prices to drop over the next few weeks to reflect lower wholesale costs the cheaper it is for retailers to buy fresh fuel stocks.
However, experts warn that prices are at risk of rising again with the Conservative government’s temporary 5p cut to fuel duty set to expire in the spring.
Edmund King, president of the AA, very Rachel Reeves, Chancellor, not to use low prices as a “reason” to start a tax raid on drivers in the Budget next month.
“Although prices are now lower and have come down, we do not want this to be an excuse for the Treasury to raise fuel duty,” he said.
“Fuel prices are fluctuating and unstable because of what’s happening in the world. It’s good for drivers at the moment, but it’s not guaranteed to last. The Treasury can use it as an excuse, then who knows, two weeks later global prices can rise again and be a double hit for drivers.
Lower gasoline prices will also be a global political issue, as the cost of living is a major factor in the US election campaign. Democrats have been blamed by Republicans for high inflation in recent years, and have potentially benefited from lower fuel prices in the United States.
However, the US is also now a net energy exporter thanks to the fracking boom, so lower prices could hurt some parts of the American oil and gas industry.
The drop in Brent prices was accelerated by separate news from Libya that rival factions had agreed on a process to elect a new central bank governor, paving the way for the restoration of exports.
Fears that Saudi Arabia’s plans will lead to a dramatic drop in Brent prices wiped almost £11bn off the value of Britain’s biggest oil giant on Thursday. BP and Shell fell at the bottom of the FTSE 100, down 4.8pc and 4.7pc respectively.
Ashley Kelty, director and research analyst for oil and gas at investment bank Panmure Liberum, said: “Crude oil prices gave up some recent gains on news that a deal had been reached in Libya that could see production resume.
“There are also long-term concerns about the state of China’s recovery and its impact on demand growth. China’s new package of stimulus measures has failed to impress investors with some analysts saying it is just a band-aid and will not help solve the structural problems in the economy.
“In Libya an agreement on the selection of a new central bank governor could see both ‘governments’ resume oil production and exports which would see up to 1m barrels per day added to global supply.”
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