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Prices at the Pump - Why Are They Falling and Will This Continue?

23rd December 2014

Photograph of Prices at the Pump - Why Are They Falling and Will This Continue?

The price consumers pay for fuel is strongly related to the price of crude oil, although it is less volatile and the effect of changes in crude oil prices are delayed.

The most recent data shows the crude oil price falling 25% on the year, so, are we in line for a big drop in fuel prices? Historical data says probably not. Looking back to late 2008 when the crude oil price fell by 40% on the year, the fall in the price paid by consumers only fell by 15%.

But this doesn't mean consumers won't see further falls in fuel prices in the coming months as OPEC (a group of oil producing countries that control a large percentage of the world's oil supply) have agreed to keep the supply of oil high for the near future, which may lead to further falls in the crude oil price.

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