Yesterday, the price of crude oil dropped by as much as $8 a barrel after a surprise move by the International Energy Agency (IEA) to release emergency reserves. This was done to compensate for lost shipments from Libya, according to the IEA.
In response to this, retail powerhouse Tesco announced today that it has slashed 3p a litre off the price of petrol and diesel on its forecourts. With prices recently peaking at 136p a litre for petrol and nearly 140p for diesel, this will certainly ease the burden a little for motorists, but groups such as the AA have suggested that the full benefit of the drop in the price of oil won’t be passed to consumers.
In the past, falling oil prices have provoked nominal price-wars between supermarkets, but the benefit for consumers has been limited.
Paul Watters, head of AA public affairs, said “We hope this oil price crash will lead to a price war on UK forecourts, but we remember post-Hurricane Katrina when a 4p drop in wholesale petrol prices took nearly three months to be reflected in its entirety at the pump.”
Experts have suggested that there were various political motives for the IEA’s move. These include punishing Iran and Venezuela for failing to cooperate with the Organization of the Petroleum Exporting Countries (OPEC), weakening the Iranian government, improving relations between the US and Saudi Arabia, and undermining the alternative energy industry.
The IEA has insisted the move was simply about easing a shortage, and not about prices. However, just a few weeks ago, the OPEC alliance failed to approve an increase in production.
It remains to be seen whether Tesco’s decision to reduce prices by 3p a litre will trigger a price-war, but any fall in prices at the pumps is likely to be welcomed by consumers.