Forecourt owners predict petrol could drop as low as 63p a litre

Petrol prices could fall as low as 63p a litre if the price of crude oil continues to tumble, retailers said yesterday.

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Petrol prices could fall as low as 63p a litre if the price of crude oil continues to tumble, retailers said yesterday.

Pump prices have already fallen to the lowest level for two years. Forecourt owners said the sharp decline in crude prices over the past year, and especially since the 11 September terrorist attacks, have been passed on to consumers and this will continue.

However, The Petrol Retailers' Association said the high rates of taxation on fuel in the UK meant the price could not fall below 63p ­ even if crude oil dropped as low as $10 a barrel. Ray Holloway, the association's director, said the Treasury's tax take would rise to unacceptable levels as the price of retail petrol fell because excise duty is set at a fixed rate of 46p a litre. VAT is also charged on fuel.

"The Government needs to be wary that, as the retail price falls, the tax rate doesn't rise beyond 80 per cent of that price. As the price of oil comes down, I'd like to see the Government reciprocate," he said.

Tesco, which has more than 300 petrol stations, said the price of its unleaded petrol was reduced by 5p a litre over the last month to an average of 69.7p a litre ­ a price last seen in July 1999.

John Church, a spokesman for the company, said: "Whenever we see lower oil prices, we will pass these on to our customers, taking account of our other costs."

BP said it was selling petrol for 83p a litre this time last year, compared with 69.9p now. A spokesman said: "We recognise that duty is much higher in the UK than elsewhere in Europe and that differential is increasing. However, we simply collect that tax and don't take a position on it." The Government has knocked 3p a litre off the duty on ultra-low sulphur fuel over the past year and later this month the Chancellor, Gordon Brown, will deliver his pre-Budget report.

Forward prices for crude oil fell 21 per cent this week to dip below $17 a barrel and are 50 per cent lower than at this time last year. A confrontation between Opec and non-Opec countries has raised the prospect of a price war, with Kuwait's oil minister suggesting this could lead to $10 a barrel oil ­ a level last seen in 1998. Opec is holding off on its fourth production cut this year until non-Opec countries, especially Russia, offer significant supply reductions in return.

Yesterday, more frantic diplomacy was taking place to avert further falls in the oil price.

Mexico and Venezuela both plan to dispatch ministers next week to Russia to convince the world's second biggest producer to agree to output cuts.

Yesterday however, Russia was still ruling out anything but a token gesture. The country's prime minister, Mikhail Kasyanov, said: "No one can make any demands of us." He said he was unworried by the price falls.

President Vladimir Putin's economic adviser even suggested that falling oil prices actually help the Russian economy, as the reduced inflow of foreign currency from oil sales will weaken the rouble, helping domestic producers compete with imports.

"As Russia is keen to keep the economy growing, there's no sweeter music to our ears than a decline in oil prices," Andrei Illarionov said in an interview with Bloomberg.