Petrol and diesel both cut to under £1 but AA demands more discounts

FUEL retailers were last night urged to cut pump prices if they benefit from falling oil costs after two supermarket chains brought petrol and diesel below £1 a litre.

The AA predicted motorists could see cuts of up to 5p a litre after Asda reduced the price of both fuels by 1p to 99.9p at all its forecourts. This was matched by Morrisons at some of its sites, including a quarter of the 50 in Scotland.

Morrisons, which reduced its prices by up to 3p, said it would consider today whether to spread the reduction to its other sites. The new price is some 4p less than Wednesday's UK average for petrol and 6p less than for diesel.

Parity for the two fuels comes a year after diesel was 13p a litre more expensive than petrol. Asda attributed this to a decline in diesel use across Europe.

The latest cuts also follow petrol prices soaring in June in a near-record monthly rise, up by almost 5p to an average of 102.7p. Since then, the level climbed further to reach almost 103.9p at the beginning of this month.

According to the petrolprices.com website, unleaded averaged 103.8p on Wednesday, and ranged between 99.9p and 115.9p. Diesel averaged 105.3p, with a range of between 99.9p and 117.0p.

The AA said a sudden $10 drop in oil prices over the past week to just over $60 a barrel last night could see pump prices fall by 5p.

Paul Watters, its spokesman, said: "Asda has the knack of riding the wave when a drop in wholesale prices looms and the AA welcomes any reduction in the price of petrol and diesel.

"If the reduction in wholesale prices continues, the AA urges other retailers to pass on the savings."

Asda, which has 176 forecourts, challenged its rivals to follow its lead because of falling wholesale prices.

David Miles, its commercial director, said: "There is no justification for any major retailer selling fuel above 1 per litre – that is why we are delighted to be able to reduce both petrol and diesel to 99.9p per litre for all our customers in line with falling costs." Phil Maud, the petrol director at Morrisons, said: "With more Brits than ever holidaying at home, that few extra pence per litre can be the difference between a little treat that makes the summer holiday a bit more special."

The AA hoped that the falling oil price reflected the reduced influence of market speculators who had pushed up fuel prices by betting on an economic recovery.

Mr Watters said: "Speculators in stock markets had a cold bucket of reality poured over them with the release of worse-than-expected US job figures last week.

"The AA hopes that this heralds a more realistic approach to oil pricing, without driving up fuel prices beyond where they need to be, undermining consumer spending and prolonging the recession."