Supermarket cuts petrol prices


Asda ptrol pump

There's extraordinarily good news at the pumps this morning, because Asda has dropped the price of petrol by 2p to 133.9p per litre, and the price of diesel by 1p to 138p per litre. Petrol is now around 5p cheaper at Asda than the national average, and diesel around 4p cheaper.

So why has Asda cut the price, and will the other retailers follow suit?

Asda said it was reacting to the fact that the wholesale cost of petrol has fallen, and wanted to pass the saving onto motorists as quickly as possible. Because the supermarkets buy in such large volumes, they tend to get a better wholesale price than other retailers, so there are even better savings to pass onto customers.

Andy Peake, Asda's Petrol Trading Director said: "We're giving our customers the opportunity to fill up their cars with lower priced fuel, putting much needed cash back in their pockets."

Will the others follow?

It doesn't necessary mean that the other supermarkets will follow. So far there has been no sign of movement.

Asda has tended to compete heavily on prices at the pump, so this wouldn't be the first time it has gone out on a limb. It has a national price cap whenever it cuts the cost of fuel, so that stores across the country charge the same amount for filling up. It means that in some areas where other supermarkets use the location in order to charge more - Asda tends to come out the cheapest.

And its so confident about its pricing strategy that it has a petrol price comparison site so you can check if you're going to get a better deal elsewhere.

All this means that Asda may be going it alone on price reductions, while the other supermarkets assume that prices will spike again in a matter of weeks, forcing pump prices back up again. As we reported last month, the experts are warning that international tensions could push prices up dramatically.

2013's most reliable cars

2013's most reliable cars

Price war?

Having said that, where one retailer brings down prices, it puts pressure on the others to respond. As recently as June this year Asda announced a price cut, and was swiftly followed by Sainsbury's, Morrisons and then Tesco.

A recent study by the OFT found that the supermarkets monitor prices that their rivals charge within a defined radius and aim to either be the cheapest or at least match the lowest price charged by a competitor in that area.

We reported last month that the AA was predicting that recent falls in the wholesale price and examples of some local petrol stations undercutting the supermarkets, could lead to a late summer petrol price war.

There is a chance, therefore, that we are seeing the first salvo fired in that war.

The most expensive petrol in the world

The most expensive petrol in the world