War fears pushed up petrol prices

Sainsbury's announced it would cut two pence off the price of a litre, after Asda and Tesco said they would reduce prices by between one and two pence.

In February drivers saw petrol prices rise to their highest levels since the September 2000 fuel crisis, as fears grew about the effect of military action on oil supplies.

Now, with coalition troops in control of Iraqi oil fields, costs have come down again - clearing the way for the supermarkets' battle for customers.

'Opposite trends'

Ray Holloway of the Petrol Retailers Association said "panic" about a possible shortage of oil had eased and it was likely there could now be a surplus.

He told BBC News: "If the first quarter of this year was about prices going up, the second quarter of this year is definitely about prices coming down - two opposite trends in the market."

More oil on the market should mean cheaper petrol prices for everyone.

But because petrol prices are fixed according to local competition, the exact price drivers will pay will depend on where they live.

Forecourts

A Sainsbury's spokeswoman said: "The price of oil has come down and, in view of the reduction, we want to pass on the best value to our customers."

Asda said it expected drivers to pay an average of 75.4p per litre for unleaded petrol at its forecourts and 77.7p per litre for diesel.

The change also affects the price of its four-star fuel.

A Tesco spokesman said: "We have a local price policy to make sure we have the lowest petrol prices in each area".

Fuel duty

But while competition is bringing petrol prices down, new rises may not be too far away.

The government has a tax increase tucked up its sleeve.

In the Budget, Chancellor Gordon Brown delayed the usual rise in duty on fuel until the start of October.