Why do fuel prices vary from city to city?
Falling petrol and diesel prices around the UK are good news for motorists, but the savings vary depending on where you fill up.
The price of fuel mainly depends on the price of crude oil, however there are other factors that contribute to motorists spending more money filling up their cars.
In November 2015, petrol stations in East Anglia were charging as much as 117.1ppl for unleaded petrol whereas in the South West the average rate was only 116.1ppl. What is more, figures from the AA show that in 2015 the gap between supermarket prices and the UK average for unleaded has grown to 2.1 ppl. So why do prices vary so much between different UK regions and retailers?
According to the experts, the main factor that determines petrol and diesel price variations around the UK is competition as well as supply and demand.
Lower fuel prices usually appear in cities with a higher number of petrol stations as the competition between retailers is higher. The opposite is for petrol stations in UK rural areas where motorists have no other alternative choice for filling up their cars and thus the prices are much higher. There are fewer people in rural areas which mean there are fewer sales, whereas in urban areas there are more people meaning more sales. It is simply, supply and demand.
Why petrol and diesel prices in supermarkets are much lower?
In rural areas petrol stations are also more likely to be run by smaller, independent retailers who have to increase charges to cover their business costs. However, in UK major cities the petrol stations are run by big companies like supermarkets that can offer more competitive prices. Supermarket fuel stations are typically 3-4p per litre cheaper than the UK national average fuel price.
Also, supermarkets are more likely to lower the rates because they can use motor fuel to promote the rest of their business and attract more shoppers.
Time and distance
Another factor that makes the difference is timing. If the petrol stations buy the fuel when the price of oil is low, then they can sell it cheaper than their competitors who bought it earlier or later at a high price.
The distance can also influence the price of diesel and petrol, since retailers which are closer to the refineries can offer more competitive prices.
Do you want to know more about price of oil and UK refineries? Read our blog 'Understanding the Fuel Price' to learn how the cost of oil and UK refineries influences the pump price.