Last week saw crude oil prices drop by a record $16 a barrel as fuel demand worries and a moves by investors set a downwards slide.
This sharp drop has prompted Shell and BP to slash fuel prices New Zealand. Reuters is also reporting possible fuel price drops over in the US following the drop.
It remains to be seen if the UK will see any fuel price reduction in the near future. The national average for petrol currently stands at 137.38p / litre.
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So the UK average is 137.38p / litre?
With 20% VAT and 58.95p duty we’re left with the fuel actually costing 55.53p / litre. Now the retailer will take a small profit and it doesn’t get to the petrol station for free so lets assume the actual wholesale price of the fuel is around 48 pence per litre.
Brent (a much better indicator than WTI) has fallen from ~$125 to $109 as of Friday, a fall of $16 or 12.8%. Taking that 12.8% off the 48 pence fuel price means we could expect a drop of 6.1 pence. It will take a few weeks to feed through and also be aware that the £/$ exchange rate will have an impact but if the oil price stays below $110 and the exchange rate doesn’t blow up, we should expect around a 6 pence drop a month from now.