Petrol prices could tumble as recession fears hit oil markets

Fears of a global recession sparked by US president Trump’s new trade tariffs have caused the price of oil to plummet, and drivers could see the benefits at the pumps within days.

Today the RAC predicted the petrol price could fall to 130p a litre from 136p at forecourts before Easter, based on oil trading at approximately $65 per barrel on the global market. However, based on analysts’ projections of weakened economies reducing global demand, the price could slide further, and West Texas Intermediate crude fell to below $60 per barrel at one point today, while Brent Crude was traded at $63 - two dollars down. 

Typically, oil producers respond to falling prices by cutting production, but at the end of last week the OPEC group of nations surprised markets by going ahead with a pre-tariff plan to increase production instead. It led some pundits to speculate the Gulf states were responding to pressure to lower pump prices for US citizens as a perceived dividend for Trump’s economic strategy, but this has reportedly been denied.

Analysts at Citi forecast that Brent Crude would trade at $60 a barrel for the next three months, while an analyst at Danske Bank said OPEC’s decision “effectively means there is no longer anybody around to catch a falling oil price”, adding that a developing trade war could see prices “drop below $60 a barrel and further".

RAC head of policy Simon Williams said: “With oil tumbling to its lowest price for four years, drivers ought to see cuts of up to 6p a litre at the pumps ahead of the Easter weekend, when the roads are notoriously busy.

"As long as the barrel carries on trading around or below the $65 mark, retailers will be obliged to pass on the savings they’re benefitting from to their customers on the forecourt,” he added.

Pointing to ongoing scrutiny of the fuel retail sector by the UK’s Competition and Markets Authority, Williams believes distributors should be motivated to drop prices at the pumps. 

“Petrol should drop from its current UK average of 136p to 130p a litre, and diesel from 143p to 137p,” he said. “If unleaded were to fall to that level, it would be the cheapest since summer 2021. Diesel hasn’t been that low since September that year.” 

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