Asda price cut fuels new war at Shropshire petrol pumps

From today, the shopping giant is knocking a further 2p off the price of its petrol and diesel. The latest reduction means that Asda customers will pay no more than 103.7p a litre on petrol, with diesel at 110.7p a litre.

It comes as it was revealed a service station in the West Midlands was believed to be the first in the UK to slash its petrol prices below £1-a-litre.

The independent owner of a garage which was dubbed the cheapest for fuel in the whole country last year said today he "did not know" how others were managing to undercut him.

Asda announced a 2p cut to move just under a £1 a litre for petrol, while a petrol station in the West Midlands has already gone under that figure.

At Grindley Brook, near Whitchurch, the price for unleaded was 105.9p a litre yesterday. Owner Dave Roberts said people were regularly queuing off the forecourt to get the fuel and sales were 40 per cent up on last year's targets.

"Our prices were better than anybody's so how they are getting below ours I don't know," he said. "We have just done record numbers last year and we were 40 per cent up on our targets. We did this without any publicity or getting involved in any price war.

"I make my margins out of it and that's it. I drop to what I can and the best I can. I regularly keep up with falling prices.

It was reported the Ablewell Service Station, supplied by Harvest Energy, in Walsall, which also has branches in Redditch and Birmingham, cut the price of unleaded to just 99.7p over the weekend, in a move welcomed by motoring organisations.

The RAC said it was the lowest such price it was aware of anywhere in the UK, and marked the first time since 2009 that the cost of filling up has been so cheap.

It welcomed the move as "more good news" for drivers in the area, predicting other retailers could follow suit.

The price of diesel at the site is 109.7p.

Among the cheapest petrol in Shropshire and Mid Wales is that being sold by the garage at Grindley Brook, near Whitchurch, but it is no longer the cheapest in the country as was widely reported at the back end of last year.

Prices on the forecourt yesterday were advertising 105.9p a litre for unleaded and 111.9p a litre for diesel.

Diesel is still as high as 120.9p a litre in some parts of Shrewsbury and in Bridgnorth, while unleaded has a high of 116.0p per litre across the Mid Wales border in Welshpool.

Andrew Faulks, from Stans Superstore in St Martins, near Oswestry, said: "Prices have been dropping for several weeks now and we are expecting to be able to drop them again today once we have notification from our wholesaler.

"It is good news for our customers, many of whom combine a shopping trip with filling up their vehicle."

Darren Everall, proprietor of Ludlow Taxis, said: "I don't think it really makes much of a difference to us, the petrol still goes just as fast if you're pottering around town.

"It would make a difference over 12 months, but it's only just gone down and it will probably creep back up soon enough. If it stays low, though, all the better."

A shop worker, who did not wish to be named at Harlescott Service Station in Shrewsbury, said: "The prices of petrol are dropping down slowly. I am not sure if we will go below the £1 mark, it depends on what everyone else is doing."

Anne-Marie Downs, manager at Shell Service Station in Welshpool Road, Shrewsbury, said: "We are not at the under £1 mark yet for petrol. It is dropping down steadily and hopefully it will stay that way for a while."

RAC fuel spokesman Simon Williams said: "We have been expecting to see the price of petrol come down to £1 per litre, or lower, for some time thanks to the decline in global oil price and retailers willing to make cuts at the pump on an almost weekly basis.

"While the average is around the 109p mark, we have seen a number of retailers going as low as 104p in recent days, but 99p per litre is the lowest we're aware of and it is hard to see how they can be making a profit as the cost of wholesale fuel needs to come down at the same time.

"However, this is more good news for motorists in that area who will benefit from the kind of prices not seen for more than five years. It is usually the supermarkets that lead the way on price cuts this deep, so perhaps this will encourage them to make a similar move, but our feeling is it may be a while yet before others follow suit and go below a £1 per litre, although it may well happen over the next few weeks."

The AA said that, although welcome, the West Midlands reduction "appears to be a publicity stunt rather than a reflection of general pump prices".

AA president Edmund King said: "There remains a postcode lottery out there when it comes to fuel prices. Drivers in rural areas are still paying much more than the £1.09 average price and in some places £1.18.

"It will still take some time to get down to an average of £1 per litre, particularly as 70 per cent of the pump price is tax."

What's behind the falls:

Petrol and diesel prices are coming down. And while no-one wants to look a gift horse in the mouth, there has to be a reason for it.

The main one is the price of crude oil dropped towards the end of last year.

In fact it was the lowest price in 27 months.

Another factor that has helped has been the freeze in fuel duty.

Tax accounts for a lot of the price we pay on the forecourt with fuel duty alone accounting for 57.95p a litre, while VAT is charged at 20 per cent.

But Chancellor George Osborne has frozen fuel duty since 2011 and says he is committed to keeping it that way for the remainder of this Parliament, which runs until May.

That results in what the Treasury claims is the longest duty freeze in more than 20 years.

Official figures suggest the price at the pump is 18p per litre lower than it would have been had the Government stuck with the previous plans set out under Labour.

But it is the drop in the wholesale price, which accounts for 20 per cent to 25 per cent of the cost of a litre of fuel, that is making the big, tangible difference at the moment.

Over the past six months the price of crude oil dropped by more than 50 per cent to around 50 dollars, or £33.13, a barrel.

The drop came because of a reduction in demand from China as well as rising production in the US by the process of "fracking" oil from rock.

Meanwhile oil producing countries such Saudi Arabia have refused to cut back on the amount they offer for sale.

Some commentators say they are in fact trying to protect their share of the market against competition from the US's growing shale oil and gas industry.

And there's nothing to suggest how long this is going to last so motorists may as well enjoy it while they can.