Fuel prices have plummeted throughout 2015, and now major supermarket chains including Morrisons, Tesco and Sainsbury's have cut the petrol price below £1 a litre as oil prices continue to fall. This is the lowest, non-promotional UK price level since 2009, but can we expect to see prices slide further, or should we fill up now.

The fall in fuel prices is due to the continuing fall in oil prices, mainly caused by increasing supply from Saudi Arabia and other OPEC countries as well as fracking in the US. There are also concerns that a slowdown in China's manufacturing economy could weaken future demand for oil.

The usual response to falling oil prices would be for OPEC (Organisation for Petroleum Exporting Countries) to reduce supply, however in their latest biennial meeting countries failed to reach agreement to cap output, leading to a further fall in prices. The OPEC countries are hugely dependent on oil and in the absence of an OPEC agreement they are under pressure to increase supply in order to maintain their economies.

Iran is also suggesting they will increase production when sanctions are lifted, which is expected to lead to further falls in oil. However, if oil prices drop too far it could prompt a sharp reaction from OPEC countries to cut supply and force prices up to prevent their own economies collapsing.

It seems inevitable that OPEC countries will act to raise prices at some point, but the timing is unclear. OPEC have stated that oil prices will reach $70 per barrel by 2020, twice their current level but still below a sustainable price for many oil producing countries. Another upward pressure is the ongoing instability in the Middle East and Libya. The consensus view is that oil prices will increase during 2016, but predictions of when and how much vary widely.

However most of the cost of fuel in the UK is down to fuel duty and VAT. Currently this stands at approximately 75p per litre. Fuel duty is expected to rise by 2p from April 2016 for the first time in four years.

Despite the falling prices making fuel look cheap, the UK diesel price is still the highest in the EU and the UK retail price for petrol ranks third highest in the EU behind Italy and Norway. Again mainly due to the differing rates of fuel duty and subsidy in the various countries.

Falling oil and fuel prices have wider impacts on inflation levels and interest rates. Continuing low oil prices have a downward pressure on inflation. As the Bank of England is tasked with maintaining inflation at 2% they are unlikely to  increase base rates until there are positive signs of inflation,which could mean low base rates continuing well into 2016, if not almost 2017.

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