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Petrol price hits three-year low as crude falls again

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By Terry Macalister

Thursday 1 January 2009

British motorists were given some new year’s cheer as petrol prices were cut further yesterday against a backdrop of oil prices that have fallen by 60% since the beginning of the year.

Tesco said it was slashing prices at a time when the cost of filling up had already followed tumbling oil values by plunging to a three-year low. The reduction of 3p a litre at 430 filling stations is likely to be followed by Tesco’s rivals. Continuing the fuel price war, Total and Shell both announced that they were dropping their lowest petrol price to 82.9p a litre.

The AA said the average cost of petrol this week had fallen to 87.79p a litre compared with 88.27p in December 2005 and highs of nearly 120p this summer.

Diesel is now averaging 99.72p a litre – the lowest price since November 2007 and it is estimated that a British driver is on average now paying nearly £16 less to fill up a typical 50-litre tank than in July.

The cost of crude on the world market continued on its downward trend, falling below $39 a barrel yesterday in Asia. The price is down by about 60% this year.

Light sweet crude for February delivery fell 70 cents to $38.33 a barrel in trading on the New York Mercantile Exchange compared with a record $147.27 on 11 July. The highs were due to assumptions of growing demand from emerging economies, such as China and India, and followed a rise of 57% in 2007. But the price of oil, and other major commodities, went into reverse in the second half of 2008 as the global economic crisis hit consumer spending and industrial production.

The New York price fell to its lowest in almost five years at $33.87 earlier this month, although fears this week that the Israeli bombing campaign against Gaza could further heighten tension in the Middle East raised prices towards $40.

Pessimism about prospects for growth in the world economy has reduced the price of copper close to a 21-year low although it was up $45, or 1.5%, in trading yesterday at $2,960 a ton on the London Metal Exchange. This compares with a record price of $8,940 in July.

The cost of commodities will depend partly on the success of the US economic stimulus package, although oil values will also be influenced by Opec. To help their petroleum-dominated economies, the oil producers have vowed to cut production by 4.2m barrels a day to push the price upwards again but the cartel has had mixed success with this policy.

Tesco said its lowest petrol price was now 82.9p a litre and Richard Brasher, commercial director, believed it may dispel some end-of-year gloom: “There will be lots of people waking up on New Year’s Day worrying about what 2009 means for their finances and for many the cost of motoring will be a significant factor.”

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