From Thursday morning, ASDA dropped the price of its petrol by up to 2p per litre for unleaded. They announced the move the day before, prompting something of a price war among supermarkets, as both Sainsburys and Tesco soon announced they would cut their prices by up to 2p per litre. The price cut has allowed drivers filling up at its 203 forecourts to take advantage of paying no more than 133.7p per litre for unleaded fuel.
This is a quick response to reductions in wholesale prices for unleaded fuel. However, due to wholesale costs remaining the same for diesel, this latest reduction is only being applied to unleaded. Diesel costs will stay at 139.7p per litre.
ASDA head of petrol trading Jeremy Walton says that they always strive to be the first retailer in every part of the country to reduce fuel prices when costs fall. On the other hand, they strive to be last to increase prices. When they do decide on price cuts, they are applied everywhere with a maximum national cap set for customers. This means they all benefit from lower prices, no matter where they live.
ASDA is different from other oil companies and supermarkets due to its maximum national price cap. This policy is the reason the AA believes that towns where the supermarket has a petrol station are the most likely to have the cheapest petrol prices in the UK.
This isn’t the first time ASDA has paved the way with petrol price reductions, as it’s done this several times this year. Last month, the supermarket announced an up to 3p per litre cut that brought the price of unleaded fuel to 135.7p per litre. Also last month, the supermarket launched its first petrol price checker app for Android operating systems. This allows motorists to check the current prices at their nearest store via their mobile phone. Drivers can also check how much they can save on fuel by using the company’s petrol price comparison website, which allows them to find the cheapest price before they fill up.
As for the other supermarkets, Sainsbury’s head of fuel Richard Crampton says that they are always searching for ways to help consumers save – especially in the run-up to the festive season. They are delighted that they will be reducing their prices on petrol by up to 2p per litre. A spokesman for Tesco added that they are reducing the price of unleaded fuel by as much as 2p per litre. As the largest petrol retailer in Britain with 490 forecourts, more drivers will save at their pumps than any other fuel retailer.
Paul Watters, the head of public affairs at the AA, says that their fuel price report pointed to a 4p decline in petrol wholesale prices last week that would be working its way to stations. The average petrol prices at the pump hit a late high for the summer of about 140p per litre in the middle of last month. They hovered there for about two weeks, and the average price on Wednesday was only down to 138.7p per litre. This announcement of price reductions from supermarkets is welcome. However, unless the rest of the market passes the savings on, the same old story will continue – retailers are fast to raise prices but slow to lower them.
However, Retail Motor Industry Federation chairman Brian Madderson argues that major supermarkets use petrol prices as a loss leader. They sell fuel at no profit to attract shoppers, assuming the difference will be made up with in-store sales. He claims the supermarket price war is devastating small petrol station owners in Britain, resulting in one going out of business every day.