Fuel Prices: 'Good Chance' Of £1 A Litre

Petrol (LSE: 0IMR.L - news) prices are forecast to fall further over the coming weeks, with the RAC (Taiwan OTC: 2237.TWO - news) seeing a "good chance" that supermarket pump costs will reach £1 per litre.

The motoring organisation said it expected reductions of 2p a litre in both petrol and diesel costs over the next fortnight - reflecting continued weakness in oil costs which are still hovering near six-year lows.

A barrel of Brent crude is currently costing just over $44 - reflecting high stockpiles and production amid weak demand because of the economic slowdown in China and many emerging markets.

The glut is explained by several factors, including a refusal to slash output within the Organisation of the Petroleum Exporting Countries (OPEC) cartel as it battles to keep market share with US shale oil flooding the market.

Russian production is at record levels as it attempts to maximise revenues from losses to income through economic sanctions imposed by the West for its actions in Ukraine.

A warm autumn in both the US and Europe has also been credited with pegging oil costs down - with a recent note by Goldman Sachs (NYSE: GS-PB - news) indicating that prices could halve if warmer weather persists in the current market climate.

The RAC said the average price of petrol, which has fallen for the last four months, was currently at 108p - with diesel just over 110p.

A postcode lottery remained, though, with supermarkets generally offering the cheapest fuel.

The RAC called for retailers to pass on savings in the wholesale cost.

Just last week, the AA told Sky News that pump prices were failing to keep pace with declines in oil costs because refineries had been protecting their margins.

RAC fuel spokesman Simon Williams said: "After a summer of lower forecourt prices, motorists are now looking forward to the prospect of yet lower petrol and diesel in the run-up to the expensive festive period.

"While we are a way off average petrol prices reaching £1 a litre, there is a good chance the most price-competitive fuel retailers will take the plunge.

The last time petrol costs widely hit £1 a litre was in 2009, the RAC said.

Mr Williams added: "Low oil and fuel prices appear to be here to stay as cutting supply to shore up prices is not an option for OPEC as it is dead set on not letting its competitors take any of its share.

"With (Other OTC: WWTH - news) yet more oil due to hit the market as Iran begins to produce again following its nuclear deal with the West, the long-term outlook has to be low oil prices for a further 12 months (Other OTC: UBGXF - news) ."