Another Bank Holiday weekend - and the start of a new supermarket price war. As usual, Asda cut first. It slashed petrol to 136.7p and 141.7p a litre for derv (diesel engine road vehicle).

Sainsbury's and Tesco followed. Broadly it means fuel prices have dropped by up to 4p a litre in the last three weeks alone. Can the cuts continue?


Temporary cut

Possibly, but not for long. Don't forget that Chancellor George Osborne announced in the Budget that he plans to hike fuel duty tax by 4 pence (including VAT) come 1 August. That means that total fuel duty going to the Government will rise from 57.95p to almost 61p per litre of fuel.

When you add VAT on top, that will push total Treasury income from diesel and petrol to around 86p a litre. As far as Morrisons supermarkets goes, their press office told us they were cutting fuel "by up to 2p. We have different prices in different localities. We absolutely will be competitive and be amongst the lowest in every single location."


Note, "amongst", so Morrisons won't be price-matching Asda. Tesco is adopting a similar policy to Morrisons. So be careful where you do fill up. Despite the recent price cuts, the price of diesel and petrol has soared by almost 25 per cent and 20 per cent in the last two years alone.

Little sympathy from Osborne

AA president Edmund King recently wrote to George Osborne pleading for the Government to rethink fuel duty. The private car is not a luxury for most people, it's a necessity King said. But it's clear many people are re-thinking car use. Hence the rise in car clubs in larger cities, allowing you to hire a car for just an hour - or 24, or longer.

For those who don't live in large cities, they have little choice about car use. Especially when you factor in a dismal (and increasingly expensive) bus service. So though the Bank Holiday cuts are welcome - they will slash the total cost of filling an average sized car by around £1.40 - the longer-term trend is definitely up.

Just ask the Chancellor.



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