Asda could spark a supermarket price war by cutting the cost of its fuel.
From tomorrow, Asda is reducing the price of its petrol by up to 2p a litre, with diesel coming down 1p a litre.
This means that drivers filling up at Asda will pay no more than 124.7p a litre for petrol and 128.7p for diesel - the lowest prices since January 2011.
Asda petrol director Andy Peake said: "It now costs £6 less than last summer to fill up a family car with fuel, meaning we're putting much-needed cash back in drivers' pockets for those bank holiday ice-creams."
Lower petrol prices helped inflation fall to a new four-year low of 1.7% in February, official figures showed today.
It marks the fifth monthly slowdown in a row.
Petrol prices dropped 0.8p per litre between January and February this year, compared with a 4p rise for the same period in 2013.
The Consumer Prices Index rate fell from 1.9% in January as it continued to fall short of the Bank of England's target of 2%, the Office for National Statistics said. CPI has not been lower since October 2009, when it stood at 1.5%.
The fall in inflation to 1.7% was widely predicted and suggests private sector pay growth - which was also 1.7% in the three months to January - has already caught up.
However, total wages are only rising by 1.4%, with ordinary public sector workers seeing a rise of just 0.9%, according to the latest figures.
The President of the AA has warned that petrol prices could rise as a result of closures at Grangemouth and other refineries in Europe:
This closure is a major blow for the workers involved, local employment and indeed the fuel supply chain.
The AA is concerned with the impact of this refinery closure. The European commodity trading houses have been predicting the loss of five to six refinery plants over the next two years.
In March/April of last year, with the closure of refineries and the impending start of the US motoring season, wholesale prices went up by 20 percent, adding 8p to 10p to a litre of petrol. The spike was short-lived because US drivers cut back and some of the refineries were bought. However, the damage was done and a new UK petrol record (142.48p a litre) was set.
Let us hope this decision can be reversed.
The drop in petrol prices is a "dramatic improvement" for squeezed families and the timing "could not be better", according to the head of AA.
However, Edmund King urged the Government to secure the future of British oil refineries, as their closure would have a knock on effect for consumers.
A more than £2.50-a-tank cut in petrol costs for families is a dramatic improvement on its own. But, heading into winter with cars using more fuel, the timing couldn't be better.
The bigger picture, with the future of refineries in the British Isles under threat, is more worrying and the AA urges the Government to find ways to support them. Last year's bitter experience of speculator-inflated pump prices, fuelled by refinery closures, should be warning enough - even before considering the loss of UK manufacturing jobs.
It is not only motorists who will enjoy the biggest drop in petrol prices since the credit crunch began - businesses have received a boost as consumers spend their cash somewhere other than the pump.
- According to the AA, the 5.48p average drop in petrol prices will have diverted £2.83 million a day from the pump to consumer spending.
- Northern Ireland was the most expensive place for petrol in mid-October, with costing 132.9p a litre, even though it had also seen the biggest fall over the last month.
- London, the north of England, and Yorkshire and Humberside are jointly the cheapest areas at 131.9p.
- Despite a 3.3p-a-litre reduction since mid-September, Scotland remains most expensive for diesel at 140.1p a litre while London is cheapest at 138.6p.
Petrol prices have had their biggest fall since the credit crunch in 2008 - but motorists are being warned by the AA that further reductions are unlikely.
The average petrol price feel by 5.49p a litre between mid-September and mid-October - the biggest monthly fall since the 11.5p petrol price collapse in November 2008, the AA said.
The AA said the price falls have cut £2.74 off the cost of refuelling a small petrol car and £3.84 off the bill for a Ford Mondeo-sized petrol vehicle.
A family with two petrol cars will have seen the monthly fuel bill fall by £10.
However, the AA warned prices were unlikely to fall further since the pound lost "some of its value" against the dollar " and the US budget agreement expected to strengthen the economy.
Asda, Sainsbury's and Morrisons will cut their petrol and diesel prices by 2p a litre from tomorrow in an attempt to encourage motorists to visit their stores. Prices have risen on average 1p a litre over the past month.
The AA President Edmund King welcomed the news: "Our June fuel price report revealed that retailers had on average this year been charging at least a 1p per litre extra on diesel. Hence we believe that all retailers should look to cut fuel prices to reflect the market price at the pumps".
The cost of filling up at the pumps has edged up over the last month, with diesel drivers getting a worse deal than those using petrol, according to figures from the AA.
The average price of petrol in the UK has risen from 133.35p a litre in mid-May to 134.61p in mid-June, while diesel has gone up from 138.17p a litre to 139.16p.
Northern Ireland has the most expensive petrol, at an average of 135.8p a litre, with London having the cheapest, at 134.61p.
Northern Ireland also has the dearest diesel (139.8p a litre) with London and south west England having the least expensive (139.1p).
The AA said the slight rise in average petrol prices nationally represented "something of a lull" after the 8-10p swings in prices over the last 12 months.
From today motorists will be able to buy cheaper petrol at supermarkets, following cuts in the price of supermarket diesel announced last week.
Asda, Sainsbury's, Morrsions and Tesco will reduce their prices, with Morrisons cutting up to 3p a litre off petrol and 1p a litre off diesel.
RAC technical director David Bizley said: "Certainly, these price cuts will be widely welcomed by UK motorists and it is encouraging to see that the drop in the wholesale price of fuel is being passed on."
Motorists will be able to buy cheaper petrol tomorrow after four leading supermarkets announced they were cutting prices.
Here are the cuts:
- Asda are reducing the price of petrol by 2p a litre. Diesel continues at 137.7p a litre.
- Sainsbury's also announced a petrol cut of up to 2p a litre.
- Morrisons will cut petrol by 3p a litre and 1p a litre off diesel.
- Tesco is bringing in a cut of up to 2p a litre.
AA president Edmund King welcomed the cuts, he said: "We predicted these cuts last week, with oil down to its lowest level in a month and the pound gaining on the dollar after its recent fall.
"This is perhaps another glimmer of sunlight for drivers after a hard, wet, pot-holed and expensive winter of driving."