Petrol price war 'may not last'

The price of crude oil fell below 100 US dollars a barrel earlier this week for the first time since April - down around a third from the July peak of 147 US dollars - but the Petrol Retailers' Association (PRA) said this was not the only factor contributing to prices at the pump.

Ray Holloway, director of the PRA, said fluctuating international currency markets also affect the cost of fuel on the forecourt, and a strengthening US dollar could force retailers to put prices up again later in the year.

"All oil products are priced in US dollars, therefore exchange rate variation impacts on the retail pump price," Ray Holloway, director of the PRA, said. "If the exchange rate of August 1 (£1.974 to 1 US dollar) applied on September 12 (£1.792 to 1 US dollar) motorists would be paying approximately 5p less for each litre.

"In the US we're going to have two important events this year - the Bush administration is going to come out with its plan for turning the economy round, and the other is the election. Both of these are likely to strengthen the dollar, which will mean more expensive fuel for the motorist in this country."

The current round of price cuts had come at the expense of the retailers' profit margins, he said.

Mr Holloway said that while the price of crude oil had fallen, the wholesale price that retailers pay for petrol had remained the same.

Crude fell by 20.1% between August 1 and September 12, from 122.40 dollars a barrel to 97.90, Mr Holloway said, but the cost of petrol supplied to retailers remained constant.

Continuing volatility in the stock markets could also push oil prices up, Mr Holloway said, as investors look to put their money in "safe" commodities such as gold and oil, rather than more risky stock.

In Britain Total became the latest chain to cut its petrol prices slashing 3p off the cost of a litre of unleaded and diesel fuels. BP, Morrisons and Asda have all cut their forecourt prices, while Shell and Esso have promised to follow suit.