Petrol 'to be cut by 25p a gallon'

MOTORISTS could see pump prices plunge by up to 25p a gallon in a summer price war. From today, supermarkets chain Asda is cutting nearly 5p a gallon (1p a litre) off unleaded, for a price of 71.7p a litre. And rival Safeway, in a promotion tied to how much its customers spend on shopping, is lopping up to £1 off the price of a gallon.

But the Petrol Retailers' Association said 'no-strings' reductions will appear this summer as increased competition and lower crude prices force the oil firms to act. The 14,000-member association predicts that by the end of July BP, Shell, Texaco and Esso will have cut their petrol prices by around 25p a gallon. That means the average unleaded price will fall from around £3.40 a gallon to £3.18 (70p a litre).

The news, which came as as crude oil prices fell sharply on international markets, was welcomed by the AA as 'a step in the right direction'. But the motoring organisation said the UK still had the highest prices in Europe - in Germany drivers pay just 67p a litre, France 65p, Portugal 56p and Spain 52p.

Crude oil prices have fallen from around $26 (£18.50) to $23.80 a barrel in recent weeks thanks to a combination of reduced demand caused by the economic slowdown and an increase in supply.

Asda said its price cut reflected the recent drop in the cost of crude oil. 'It's not a gimmick or tied to anything else. It's a straightforward price cut. We are passing that on to our customers,' said a spokesman. Its diesel is also being cut by 1p a litre to 73.4p.

The PRA said that the wholesale cost of refined petrol on the Rotterdam spot market had also dropped significantly in the last month - from £185 a tonne to £170 a tonne. The association's director Ray Holloway said: 'All the indications are that petrol prices will be going down. It is looking good for consumers. We predict that prices will drop from an average of 74.9p to 70p a litre by the end of July. The oil companies will try to hold it at 70p.'

But he stressed that the market was still volatile with tension in the Middle East, the US on terrorist alert and members of the Organisation of Petroleum Exporting Countries (Opec) meeting on 26 June to discuss supplies.

Under the Safeway scheme, customers who spend £25 in the store will receive a 2p per litre discount (10p per gallon). This rises to 5p a litre for those spending £50, 8p per litre for spending £75, 12p per litre when spending £100 and the full 20p per litre when spending £150. Safeway said that on average, its customers spend £80 per week, entitling them to an 8p per litre discount.

A spokesman said: 'Safeway has sparked a petrol price war by launching a scheme which enables its customers to buy the cheapest fuel in the country at 53.8p per litre (£2.44 a gallon).'