In the UK, the cost of petrol and diesel is declining at the quickest rate of the year; consumers now spend roughly £4 less than they did one month ago to fill up a family car.

The average cost of a litre of unleaded petrol in the UK is currently slightly over 136.15p, according to analysis from the RAC. This is a 7p decrease from the 142.86p average from the previous month. A month ago, diesel cost less than 148p a litre; now, it is nearly 141p.

Since December of last year, when prices also dropped by 7p per litre, this represents the largest decrease in the cost of petrol and diesel.

According to the RAC, drivers should brace themselves for additional price reductions. They estimate that within the next two weeks, petrol and diesel prices will reach a three-year low of 132p and 138p per litre, respectively.

Lower worldwide demand for oil, which caused the price of a barrel to drop to $73 last week, was cited by the RAC as the explanation of the decline. Another factor was the stronger pound relative to the dollar, which is the currency used to trade oil.

With the increase in diesel to 158.3p and the average petrol price to 150.1p in April, there has been a notable change in the market.

The Office for National Statistics said earlier this week that one of the key reasons August's headline inflation rate stayed at 2.2% was the decline in fuel prices.

The RAC’s lead spokesperson on fuel, Simon Williams, said: “It’s really encouraging to see pump prices coming down so rapidly, which we know is as good for drivers’ wallets as it is for keeping the headline level of inflation in check.

“Of course, global oil prices and even the strength of the pound can fluctuate wildly, and that’s something completely out of drivers’ control. But with the cost of filling up making up a sizeable chunk of many households’ overall monthly spending, it makes sense to stretch every pound spent on fuel as far as possible.”

The RAC told drivers earlier this month to expect a fuel duty rise as part of Rachel Reeves’s budget speech next month as she looks to close what Labour calls a £22bn hole in the public finances.

The then chancellor, Rishi Sunak, cut fuel duty by 5p a litre in March 2022 after Russia’s invasion of Ukraine pushed up energy costs. His successor could, however, scrap the cut, which would lift fuel duty back up to 58p a litre.

Williams said at the time that the 5p discount was losing the Treasury £2bn a year and would probably be removed.

“We’d normally be against any increase in duty, but we’ve long been saying drivers haven’t been benefiting from the current discount due to much higher than average retailer margins,” he said.

“As more and more EVs come on to the roads the government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT.”