Driving home for Christmas? Cheapest fuel prices since Covid will keep costs low

Driving home for Christmas is set to be cheaper this year because fuel prices are on track to be the lowest of any festive period since the Covid-19 pandemic.

Despite a price rise of around one pence per litre in November, the average cost of petrol currently hovers around 136.5 pence per litre, while diesel prices are at an average of 142.25 pence per litre after rising by two pence. This brings the cost of brimming the 55-litre fuel tank of your typical family car to £75 and £78 for petrol and diesel respectively.

Historically, the gap between petrol and diesel prices widens during the winter as the so-called “driving season” in the US ends, leaving surplus petrol to be sold at lower prices. On the other hand, as continental Europe freezes, diesel is often used in heating oil, increasing demand and prices.

Yet both petrol and diesel currently remain significantly cheaper than this time last year; according to the RAC’s Fuel Watch scheme, a litre of petrol currently costs around 10.5 pence less than in 2023, while diesel is 12 pence cheaper than last year – the equivalent of around £6.60 less per fill up of a 55-litre tank.

The RAC’s head of policy, Rod Dennis, applauded the low prices as “great news for people making long festive journeys to visit friends and families”. However, he added: “While conditions are clearly better for drivers this Christmas, we’re still conscious that prices at the pumps could be slightly cheaper if retailer margins were lower.”

Dennis’ remarks come in reference to recent comments by Dan Turnbull, the senior director of markets at the Competition and Markets Authority, who recently said that drivers “continue to be squeezed by stubbornly high fuel margins. We therefore remain concerned about weak competition in the sector and the impact on pump prices.”

The most recent data from the CMA shows the mean profit margin for fuel retailers is around 10.2 per cent – two percentage points higher than the long-term average. Supermarket profit margins are much closer at 8.2 per cent, although both are starting to rise again after a drop earlier this year.

In response to the CMA’s comments, the Petrol Retailers Association said fuel prices are “as low as possible in a highly competitive market while grappling with rising costs in the form of business rates, National Insurance, National Minimum Wage and electricity.”

Still, the Labour government continues to enact the previous Conservative administration’s PumpWatch scheme which will force retailers to submit real-time pricing information to encourage greater competition. This will be viewable on the government-developed PumpWatch app, enabling consumers to make informed decisions on where to fill up.

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