Petrol prices have fallen back from record levels, leading to average savings of £1.50 per tank, according to the AA.
The motoring organisation reports that average pump prices are down to 188.76p a litre for petrol and 196.96p a litre for diesel, compared with record highs of 191.53p for petrol and 199.07p for diesel recorded in the first week of July.
It says retailers have finally begun to pass on reductions in the wholesale cost of fuel and if the pattern were to continue, prices could drop by as much as 20p per litre by the end of July.
That would take petrol prices back towards levels last seen in May 2022 and equate to a saving of £10 for the average full tank of petrol.
Wholesale fuel prices have been falling for the last six weeks but retailers have been slow to pass these cuts on to drivers, despite rapidly hiking their prices when wholesale costs rise.
According to the AA, wholesale petrol prices peaked above £1 a litre on 1 June but dropped below 80p per litre last week.
AA fuel price spokesman Luke Bosdet said: “Wholesale petrol’s trajectory, if sustained, would lead to savings of a tenner off a tank from the record highs – providing the fuel trade is prepared to pass them on.
“So far, even with oil rebounding, wholesale petrol remains below 80.5p a litre.”
However, he warned that drivers were still at the mercy of retailers’ pricing strategies.
“The problem is that, in many places, the price cuts are quite simply not happening despite more than six weeks of falling costs,” he said. “Roads may suffer extreme heat today but pump prices should have cooled off much more significantly by now.”
Earlier this month the Competition and Markets Authority (CMA) said there was “cause for concern” in some aspects of the UK’s fuel industry.
It was ordered to review fuel prices by Business Secretary Kwasi Kwarteng amid concerns that some retailers had not passed on March’s fuel duty cut.
The CMA found that the 5p per litre cut had been passed on but highlighted a growing gap in refinery costs. It found that the increase from the crude oil price when it enters refineries to the wholesale price when it leaves them as petrol or diesel has more than tripled in the last year, from 10p per litre to nearly 35p per litre.
The watchdog has now said it will investigate the sector in more detail and “won’t hesitate” to take action if it finds evidence of collusion or similar wrongdoing.
Petrol is currently around 60p per litre more expensive than a year ago, with diesel around 66p more costly.
While wholesale prices have fallen in recent weeks, energy experts warn that the ongoing conflict in Ukraine will keep costs high.
Independent energy analyst David Cox said it was difficult to replace the volume of oil lost through restrictions and sanctions on Russia. He said: "It’s difficult to see how crude does anything but go up, while the war rages, and that’s not good news in the medium term for petrol prices.”