Unleaded drops to 79.9p, as pump price war begins

Motorists hit by months of rising petrol costs were offered a respite yesterday when two supermarkets signalled the start of a pump price war.

Motorists hit by months of rising petrol costs were offered a respite yesterday when two supermarkets signalled the start of a pump price war.

Morrisons, an independent chain based in the north of England, stole a march on its bigger rivals by announcing it was cutting 2p off the price of a litre of unleaded petrol, down to 79.9p, at its 80 forecourts.

The move was rapidly matched by Sainsbury's, which confirmed it was cutting the price at all its filling stations from an average of 83.9p per litre to 79.9p.

The price cuts, which were welcomed by motoring organisations, came just four days before the start of the Dump the Pump boycott of petrol stations on 1 August.

Supermarket buyers said they were able to offer the price reductions because of a drop in the price of crude oil and a linked reduction in the cost of refined products, including unleaded petrol.

Bob Stott, buying director at Morrisons, predicted similar cuts by other retailers, including the big oil companies, as the swingeing rises of the first half of 2000 go into reverse.

He said: "Motorists were hit very hard by a 30 per cent rise in the price of crude but now that is falling. It is simple economics that the cost to us then falls and it is right that that should be passed on to the consumer."

But other large supermarkets and the mainstream petrol retailers held off announcing immediate price cuts in response to the move by Morrisons, with both Asda and Tesco saying they already offered price guarantees to match local prices. The average price at pumps across the country last night remained at 84.2p for a litre of unleaded fuel, which equates to about £3.80 a gallon.

The Dump the Pump campaign, organised by Garry Russell, a website designer, said its series of one-day embargoes on petrol stations to persuade retailers and the Government to cut prices would continue.

A spokesman said: "The fact remains that for every £50 of petrol, £37 goes to the Treasury. Combined with the rises in prices, the motorist has had enough and the boycott goes ahead."

Industry observers meanwhile predicted a general but narrow fall in prices over coming weeks. Ray Holloway, the director of the Petrol Retailers' Association, said: "I think most petrol stations will drop their prices but it won't be massive. It will be in the region of 1p or 2p all round."

The RAC Foundation criticised oil companies for not being quick enough to pass on falls in prices to the consumer. Edmund King, a spokesman, said: "We have seen in recent months that the mainstream petrol stations have increased their prices on the same day as an increase in crude.

"That should be a two-way situation, with a price decrease following just as rapidly when crude falls. Unfortunately that has patently not been the case."