Oil firms under pressure to pass on drop in prices

Oil firms and the government were under increasing pressure last night to ensure that the sharp fall in the price of crude oil is properly reflected at the petrol pumps.

Oil firms and the government were under increasing pressure last night to ensure that the sharp fall in the price of crude oil is properly reflected at the petrol pumps.

Shell announced a cut of 1p per litre yesterday. This follows the decision by a number of supermarket chains to cut their prices by a penny, bringing the cost of unleaded down to 77.8p for Sainsbury's, 78p for Tesco and 75.8p for the northern-based chain Morrisons. Asda chopped 1.2p off its prices last week.

Consumer groups demanded that Gordon Brown should intervene should the firms fail to cut prices further. The Chancellor stressed last autumn that he wanted a fall in crude oil prices to be passed on to drivers as quickly as possible.

However, oil firms are due to meet the Energy minister, Helen Liddell, later this month to discuss pricing, and, according to Whitehall sources, no government action is envisaged until then.

Although petrol pump prices now average 78.4p a litre they are still about 3p a litre higher than wholesale prices which have plummeted from $34 (£24) a barrel at the height of September's crisis to under $24. Since last January, the wholesale price paid by fuel firms has dropped from 11.3p a litre to 11.1p. Over the same period, the average forecourt price of unleaded has risen from 75.4 pence to 79.9p. And although Excise duty had gone up by 1.6p and VAT by 0.7p the petrol firms earnings had risen from 5.7p to 8p.

Other oil companies are expected to follow Shell . However, yesterday evening BP, Esso, Texaco and TotalFinaElf were holding back from announcing cuts while insisting their prices would remain "competitive".

Petrol retailers insisted they could not could prices fall much further unless the Chancellor reduces fuel taxes, and warned of further crippling fuel protests across the country if he does not. Ray Holloway, of the Petrol Retailers' Association, said: "The percentage of tax in the retail price during the protests was 76 per cent and that has now risen to 79 per cent," said "That figure is the very reason why prices cannot fall much further in the UK - it won't be until you see a change in Government policy that that could occur.

"If there was reason to protest in September there will certainly be reason for protesters to start all over again in the spring."

David Handley, the chairman of Farmers for Action and a key player in September's fuel protests, raised the prospect of renewed demonstrations. He said: "We're already in negotiations about new protests around the country and feeling is very high. It won't be too long before the troops are out.

"If Tony Blair wants to make contact he knows the number and he can explain to us why he's not prepared to do any more."

Shadow transport minister Bernard Jenkin called on the Government to cut fuel duty . He said "During the fuel crisis Labour was always blaming the high price of crude oil for high petrol prices.

"Now that the price of crude has tumbled who does Labour blame? The real problem in Britain is that while we have the cheapest pre-tax petrol we have the highest petrol taxes in Europe."