The cost of petrol is set to fall again after a leading figure in OPEC contemplated the oil price dropping to as low as $20 a barrel.
The RAC said unleaded petrol and diesel could fall by 7p a litre to 107p and 114p respectively over the festive period. Unleaded is currently averaging 114.07p and diesel 120.59p a litre.
But it warned that cuts at the pump will be limited, however low the oil price goes, by the fact that tax makes up so much of the cost of petrol. Fuel duty and VAT comprise nearly 70p in every ï¿½1 spent at the pumps.
And the AA says motorists are still cutting back on their driving after being victims of ï¿½cripplingly-high pump pricesï¿½ over recent years.
Oil has already slumped by nearly 50 per cent to under $60 a barrel since mid-June but could drop further following astonishing remarks by Saudi oil minister Ali al-Naimi.
He is arguably the most powerful figure in the Arab-dominated oil cartel OPEC ï¿½ the Organisation of Petroleum Exporting Countries.
He has insisted that production will not be cut back to restrict demand and push the price back up. ï¿½It is not in the interest of OPEC producers to cut their production, whatever the price,ï¿½ he told the Middle East Economic Survey.ï¿½Whether it goes down to $20, $40, $50, $60, it is irrelevant.ï¿½ He added that the world may never again see oil at $100 a barrel.
The Saudis want to keep their large market share of the oil market by keeping down the price.
Mr al-Naimi said that if Saudi Arabia cut production ï¿½the price will go up and the Russians, the Brazilians, US shale oil producers, will take my shareï¿½.
Oil analyst Jamie Webster, at IHS Energy, said the remarks represent a ï¿½fundamental changeï¿½ in OPEC policy.
He said: ï¿½We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility. Just about everything will be touched by this.
ï¿½We have entered a scary time for the oil market.ï¿½
The drop in the price of oil spells good news for economic growth by putting more cash into motoristsï¿½ pockets.
The International Monetary Fund says a prolonged oil price drop could boost global growth by up to 0.7 per cent next year and 0.8per cent in 2016.
But it is infuriating green groups which fear cheaper fuel will put more cars on the road.
RAC fuel spokesman Simon Williams said: ï¿½The current reductions in the wholesale price of petrol mean weï¿½re looking at 107p in the next two weeks and diesel 114p. Retailers should still be reducing their current prices over the festive period.
ï¿½We think the oil price is likely to stabilise a little over Christmas as traders consolidate their positions for the break. The fall is expected to resume in earnest in the New Year.ï¿½
He added: ï¿½Even if OPEC keeps pumping oil far exceeding global demand, and the price of a barrel falls to $20, the tax paid to the Treasury on every litre of fuel fundamentally limits how low pump prices can go.
ï¿½This is, however, another strong indicator that we could be on the way to seeing petrol at ï¿½1 a litre if the oil price continues to drop towards the $40 a barrel mark in the new year.ï¿½
UK petrol consumption is still falling despite plunging prices at the pumps, according to Government figures highlighted by the AA.
They show that in November 2014 UK drivers used just under 1.5billion litres of petrol at a time when pump prices fell to an average of 122p a litre.
Yet in November 2013, consumption was more than 1.52billion litres at a time when pump prices averaged 130.4p a litre.
However, diesel sales in November 2014 reached a record 2.50billion litres, up 6.1per cent on the October 2014 figure and 64 million litres higher than the November 2013 total of just under 2.44billion litres.
AA president Edmund King said: ï¿½Once again, the official statistics illustrate the trauma of cripplingly-high pump prices over recent years.
ï¿½In 2012, you could see the petrol consumption rise and fall in line with prices. Now consumption is struggling to get out of the rut created by drivers and families being forced long-term to adopt fuel-saving travel patterns to make ends meet.ï¿½
Mr King added: ï¿½It suggests that the savings from lower pump prices are being used to balance the books of family expenditure rather than increasing mileages. This points to the likelihood that much of the spare cash will find its way back to the high street.ï¿½
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