The RAC is today issuing an urgent appeal to the UK’s biggest fuel retailers to do the right thing and cut fuel prices at the pumps to reflect a steady drop in wholesale costs, which began at the start of July and accelerated sharply last week.

With retailers having been found by the Competition and Markets Authority to have overcharged drivers by £1.6bn in 2023, the RAC believes the recent fall in the price of oil and the strengthening of the pound – the two biggest factors in determining the wholesale price of petrol and diesel – present an opportunity for retailers to regain the trust of drivers by reducing their pump prices significantly.

Data from RAC Fuel Watch shows the delivered wholesale price of petrol averaged 103p a litre last week which, with a retailer margin of 10p – 2p more than the long-term average of 8p, should lead to average prices of just under 136p including VAT, a whole 6p lower than the current UK average of 142p. Diesel, which is currently averaging 147p, should be being sold for 139p with a 10p retailer margin given the wholesale price of 106p. Further RAC analysis reveals that the UK has now had the questionable honour of having the most expensive diesel in Europe for the last 16 out of 17 weeks, and that’s even with a 5p fuel duty discount.

The average price of a litre of unleaded bought at one of the big four supermarkets, which dominate UK fuel sales, is 138p and diesel is 143p. Interestingly, their petrol is priced the same as the average price charged across the whole of Northern Ireland but diesel there is still 3p cheaper than at UK supermarkets, at an average of 139.7p.

In terms of fuel duty, RAC head of policy Simon Williams commented: “We’ve reached the conclusion the Chancellor has no option but to put fuel duty back up to 58p a litre in October’s Budget.

“She knows the 5p discount is losing the Treasury £2bn a year. She also knows drivers were overcharged by a staggering £1.6bn last year according to the Competition and Markets Authority’s recent report.

“We’d normally be against any increase in duty, but we’ve long been saying drivers haven’t been benefitting from the current discount due to much higher-than-average retailer margins.

“As more and more EVs come on to the roads the Government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT. This would give retailers nowhere to hide.”