Cost of petrol plummets

Motorists saw the price of petrol fall by more than 10 pence a gallon last month, as supermarkets launched a summer price war.

It is the first drop enjoyed by drivers since tensions in the Middle East and high demand in America drove up the price of crude in February, sparking a sharp rise in the cost of petrol. Then, a gallon of unleaded cost just £3.09 (67.97 pence per litre). By May it had shot up by 39 pence to £3.48 a gallon (76.74ppl).

But in June - as major supermarkets slashed prices to tempt more customers onto their forecourts and into their stores - prices fell to an average £3.37 a gallon (74.34ppl). In 2000 and 2001 the price of unleaded petrol reached its annual high point in the period from May to July. But June is bucking the trend this year, thanks to intense UK competition.

Danny Clenaghan, managing director of Fuel and Business Solutions at ARVAL PHH, the UK's largest car-fleet and fuel management company, said: "One of the main factors influencing the price of petrol is competition between the supermarkets. As a result, the price wars instigated by several major chains have resulted in falling prices from most fuel retailers.

"The same impact has not been felt in the diesel market, where the monthly average price has remained in the 74-76 pence-per-litre range all year. The supermarket discounts and offers are having little effect on the high fuel prices faced by diesel motorists."

Mr Clenaghan warned: "This dip in the price of unleaded fuel could be short-lived. Given that UK fuel prices remain high overall, and we still have the highest level of fuel taxes in the EU, British motorists and businesses remain under significant pressure."

Recent price wars have been led by the big supermarkets, who see cheap petrol as a loss leader to attract more customers. However, major retailers - including forecourts run by Shell, Esso and BP, as well as independent petrol stations - are swiftly forced to follow the supermarkets' lead to avoid losing market share.

Prices at Asda stores are 71.1ppl for unleaded and 73.4ppl for diesel. Safeway sells unleaded for 84.9ppl and diesel for 85.9ppl. At Tesco, diesel sells for 70.9ppl and unleaded for 73.6ppl.

Motoring organisations advise drivers to shop around for the cheapest fuel.