Petrol down by 4p a litre in forecourt war

MARY FAGAN

Industrial Correspondent

A petrol price war swept across the forecourts yesterday, taking up to 4.4p off a litre of Shell fuel, and provoking the abandonment of Esso's long-established Tiger Tokens. The Petrol Retailers' Association said thousands of petrol stations could go out of business, with the loss of up to 50,000 jobs.

Shell's price-cutting move underlines a backlash by big oil companies against cut-throat pricing by supermarket petrol stations, which account for about a quarter of UK sales.

Shell retailers will set their own prices, but the recommended price of a litre of four-star is cut from 63.9p to 59.5p; unleaded will come down from 58.9p to 56.9p, and diesel from 59.9p to 58.9p. The cuts coincided with Esso's announcement of lower prices and the scrapping of its Tiger Token gift scheme from 14 February.

BP responded by saying that others "are now catching up" and that it would "remain competitive and continue to undercut other quality suppliers".

According to the AA, the effect of a 3p per litre price-cut would mean a fuel-bill saving of about pounds 36 a year for a motorist averaging up to 8,000 miles.

The onslaught of the supermarkets has squeezed the oil companies. The situation has been exacerbated by years of recession and an increase in fuel-efficient cars. The number of outlets has shrunk already to about 17,000, from 39,000 in 1968. According to the PRA, the total could slump to 9-10,000 by the end of the decade.

Shell said: "We are already in a price war and it is very difficult to say how long it will last." But it added that Shell believed its customers were also attracted by product quality and an incentive scheme that allows customers to build up units, exchangeable with gifts, entertainment and travel.

Esso's latest initiative, Pricewatch, aims to match the lowest petrol prices on offer within a three-mile radius of its 2,100 service stations. Trials of the scheme in Scotland and the North-east have resulted in 2p to 3p off a litre. John Adkins, Esso's UK divisional director of retail, said: "People will drive three miles to get lower prices and are much more interested in price than in any promotions." He said people in the Tiger Token scheme had until 14 February to top up their tokens before it was eliminated.

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