Pump wars as supermarkets cut petrol prices

Supermarkets yesterday launched a petrol price war to coincide with the start of the August holiday season.

Supermarkets yesterday launched a petrol price war to coincide with the start of the August holiday season.

The first move on petrol and diesel prices was made by Morrisons, which cut the cost of a litre of fuel by 2p to around 79.9p. Sainsbury's was prompted to follow suit and offer bigger discounts to customers spending more than £100 in its stores. Tesco and Asda, whose parent company Wal-Mart last week opened its first UK store, also said they would cut prices.

Concern over the high price of fuel is set to intensify on Tuesday, with a national boycott of petrol stations by a campaign group called Dump the Pump. The Conservative party also acted yesterday, launching a "National Fuel Day", to highlight rises in petrol prices under the Labour government.

One of the most expensive petrol stations in the country, Deans Golden Arrrow Service station in Marlborough, Wiltshire, is offering cash-payers unleaded petrol at 81.9p a litre - a cut of 10p.

The cost-price of petrol dropped recently from a high of £18 a barrel after Saudi Arabia moved to increase production against the wishes of some other members of Opec, the oil producing countries. According to the Petrol Retailers' Association, the cost-price of unleaded petrol sold in the UK has fallen by about 27 per cent in the past three weeks.

Before this fall, petrol costs had risen steadily since the introduction of the former Conservative government's fuel duty escalator system, which established an increase in petrol duty by 6 per cent above inflation. This plan arose from the Kyoto summit on the environment to combat greenhouse gas emissions, andwas endorsed by Labour on its election in 1997. However, in November, the Chancellor, Gordon Brown, said the tax would be scrapped.

The fuel duty escalator was regarded by environmentalists as a key weapon in the effort to cut Britain's greenhouse gas levels, as emissions from traffic are rising faster than from any other source. Economic forecasters have warned that the UK's targets to cut the carbon dioxide causing climate change may not be reached because increased emissions from vehicles under a laxer fuel-tax regime could outweigh savings in other sectors such as heavy industry.

Last night, the oil giants, BP Amoco and Royal Dutch/Shell Group, insisted their petrol would remain competitive in Britain after the price cuts by supermarkets. A Shell spokeswoman said: "We've already cut prices twice in the last week."

According to the AA, "Mondeo Man" now pays more than £50 to fill up his car, compared with £39 in December 1998 and about £25 a decade ago.