BUSINESS drivers and motorists in general should make the most of petrol being under £1 while it lasts as data from the RAC Fuel Watch January report has a cheap fuel warning that the market may have bottomed out.

Since oil reached a 12-year low of $26 on Wednesday 20 January ($25.73 – 27 August 2003) the barrel price has rebounded, finishing the month at $33.12, only $3 below where it started at $36.54. This has caused the wholesale cost of both petrol and diesel to rise again, although diesel still remains 3p a litre cheaper than unleaded.

January was nonetheless a landmark month for diesel with 5p/litre coming off the average pump price as a result of the supermarkets first cutting to 99.9p a litre and later to below 98p.

This led to an average petrol-diesel price flip on Monday 25 January with diesel cheaper than unleaded (101.18p diesel v 101.86p petrol) – the second time in six months, the previous time being 29 July 2015 which lasted for nearly two months.

At the start of the year an average litre of diesel cost UK motorists 105.99p, but by the close of January this had fallen to 101.05p; in contrast petrol only fell from 102.69p to 102.01p, albeit its seventh consecutive monthly drop.

As a result of the average 5p/litre diesel price reduction, the cost of filling a 55-litre family car fell £2.72 to £55.58. While this impressive monthly reduction is causing the average price of diesel to move ever closer to the £1 milestone, early signs of an oil price recovery may prevent this happening.

At the end of November, the RAC signalled that drops in the wholesale price of diesel suggested an opportunity for a significant drop in retail diesel prices and supermarkets reacted particularly positively and dropped their average prices by 6.5p from 104.41p at the start of the month to 97.96p by the close.

There was no change with supermarket unleaded prices – staying at an average of 99.87p throughout January.

RAC fuel spokesman Simon Williams said: “Motorists have seen petrol and diesel prices reach their lowest points since 2009. January saw the oil price go into free fall with talk of a barrel dropping to $20 and possibly even to $10, but since the low of $26 a barrel, the market has started to creep back up.

“If this continues for a sustained period, wholesale costs will rise further which will in turn lead to pump price increases.

“However, the oil market is notoriously volatile, even in more stable economic times, so it’s still possible that the price could drop back again.”

He added that another factor not helping the situation was that the pound has weakened significantly against the dollar – from $1.47 at the beginning of January to $1.42 by the end – and with oil traded in dollars this could prove to be even more harmful if the pound weakens against the dollar.

HM Revenue and Customs data for December 2015 shows combined sales of petrol and diesel were 1.8% down on November at 3.938bn litres but 0.4% up on December 2014. Sales of both petrol and diesel in December netted the Treasury £2.282bn in fuel duty revenue.

But sustained low pump prices may well result in HMRC changing company car mileage rates as they did in December – see our report.