Fuel retailers are under pressure to cut their pump prices after oil prices fell below $60 (£45) a barrel for the first time in more than seven months on hopes of a Russia-Ukraine peace deal.
The price of a barrel of Brent crude dropped by more than 1% to $59.20 on Tuesday morning, its lowest since early May.
Wholesale oil prices have fallen by more than 7% this month, but the average petrol pump price has edged down by only a fraction of a penny, from 137.5p a litre at the start of December to 137.3p on Monday.
Diesel prices have also remained stubbornly high, falling from 146.9p a litre at the start of the month to 146.6p a litre this week.
Luke Bosdet, the AA’s spokesperson on pump prices, said forecourts were “creating misery for drivers and businesses”, with some raising prices as recently as last weekend despite the steady fall of oil market prices.
“Essentially, average pump prices for the first half of December have been stuck on a plateau when they could have fallen,” he added.
Oil prices began to slide last month as traders assessed a potential end to the Russia-Ukraine conflict, and the possibility that sanctions against the Kremlin’s oil and gas exports may be eased and ultimately lifted.
The fall should have translated to a drop of 7p a litre by the end of last week, according to analysis by the AA, which would save a motorist filling the typical 55-litre tank more than £4.60 if passed on at the pump with VAT added.
The US president, Donald Trump, said earlier this week that a deal to end the war in Ukraine was “closer now than we have ever been”, raising optimism among European leaders over an end to the conflict.
Volodymyr Zelenskyy, the Ukrainian president, has said proposals negotiated with US officials on a peace deal could be completed within days.
Martijn Rats, Morgan Stanley’s global commodities strategist, said a return to “historical trading patterns” would effectively release a fresh inventory of oil and gas supplies into the global market.
“Definitely tens of millions, maybe a few hundred million barrels could be made available because they are not locked up in these long routes any more,” he said.
Derren Nathan, the head of equity research at Hargreaves Lansdown, said: “A peace deal between Russia and the Ukraine looks to be back on the agenda, but there have already been multiple false dawns this year.”
He added that, even without a restart of normal Russian oil and gas exports, the market appeared oversupplied, which should keep a lid on price increases next year.
“Even without Russian exports, concerns around Chinese demand as well as increasing production from Opec+ members and other nations are keeping prices way below the $80 peaks seen earlier this year,” Nathan said.
