The average cost of filling up a car is set to be £10 cheaper within the next two weeks as wholesale prices continue to fall.
According to the AA, rising petrol and diesel prices will finally start to decrease after the price of petrol recently dropped by 2.8p a litre from record highs, knocking £1.50 off the price of a tank of fuel.
Wholesale petrol soared above £1 a litre on 1 June, but fell back below 80p a litre for much of last week, a fall of 20p a litre at the pump within a fortnight.
Today the retail price of petrol is 188.76p a litre on average, while diesel is sitting at 196.96p. This is compared to record highs of 191.53p and 199.07p respectively at the beginning of the month.
Prices at the pump have increased this year on the back of rising crude oil prices (BZ=F), which is used to make petrol and diesel.
Crude was cheaper at the start of the pandemic as many businesses temporarily closed and demand for energy collapsed. However, as things returned to normal demand increased.
In addition to this, a weaker pound (GBPUSD=X) has also had an effect as fuel, like oil, is traded in dollars on the wholesale market which can dramatically affect the price retailers pay to buy it.
Lastly, the Ukraine war exacerbated prices as Russia is one of the world's largest oil exporters. As Russia faced sanctions, demand for oil from other producers increased, leading to higher prices.
The cost of filling up a family car recently rose above £100 for the first time ever after the Ukraine invasion. However, oil prices have dropped back in recent days as growing fears about recession lead to expectations of lower demand.
Luke Bosdet at the AA said: “Wholesale petrol’s trajectory, if sustained, would lead to savings from the record highs – providing the fuel trade is prepared to pass them on.
“So far this morning, even with oil rebounding, wholesale petrol remains below 80.5p a litre.”
He added: “The problem is that, in many places, the price cuts are quite simply not happening despite more than six weeks of falling costs.”
It comes as UK inflation jumped to 9.4% in the 12 months to June from 9.1% in May, mainly driven by a 42% year-on-year increase in petrol prices, and an increase of almost 10% in food prices.
Meanwhile, the competition watchdog is investigating the emerging gap between oil prices and the wholesale price of petrol and diesel, which it admitted was “a cause for concern”.
Earlier this month, the Competition and Markets Authority (CMA) revealed its preliminary findings that found that oil refineries were largely to blame for the gap.
Watch: Why are gas prices rising?