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How could Brexit affect prices at the pumps?

News   •   Feb 18, 2016 00:01 GMT

Analysts have predicted Britain exiting the EU could lead to a 20% reduction in the strength of the pound against the dollar. Motorists are currently enjoying a period of low pump prices with petrol and diesel both priced under £1 at the cheapest retailers, but what could the impact be of a 20% reduction in the value of pound be on the forecourt?

RAC fuel spokesman Simon Williams said: “While the RAC has no view on the UK’s membership of the EU, the impact on fuel prices of Britain exiting is not likely to be as dramatic as motorists might be led to think.

“A 20% fall in the value of the pound would – based on current exchange rates – only add £2 to the cost of filling up an average 55-litre petrol car, as a result of the average price of a litre rising around 4p from 101.95p to 105.56p. This would mean a two-car household filling up with petrol twice a month would spend £232 as opposed to £224.

“While the strength of the pound is a significant factor in the price motorists pay for petrol and diesel due to wholesale fuel being traded in dollars, the oil price is currently a greater influence.

“Despite talk of a slight curb in oil production this week the price of a barrel has remained stable. While it is notoriously difficult to predict what will happen next with oil prices, OPEC appears to be sticking with the general principles of its over-production strategy so there is little reason to expect anything to change drastically in the meantime. This means lower retail fuel prices look likely to remain with us until at least the middle of this year.

“And, even after that, if the barrel price was to go above $60 it would signal a major move away from OPEC’s strategy to maintain market share through a lower price and make it financially unattractive for the United States to produce oil from fracking.”