Fuel prices could be poised to go up after a dramatic “flash crash” sent the value of the pound plummeting, the RAC has warned.
The pound dropped by 6% in the currency markets in Asian trading on Friday to hit a 31-year low of $1.18.
It recovered, but as of this morning has sunk below $1.24, with investors braced for further falls.
The drop could cause the price of both petrol and diesel to rise by around 3p a litre over the next fortnight, the RAC has cautioned.
It comes after a landmark agreement between the world’s main oil-producing nations to cut supply of crude oil.
This has sparked a rise of $6 in the price of a barrel of oil to $50 – a price not seen since the start of June.
Then, the pound was worth $1.45 and the average price of unleaded and diesel was around 111p a litre.
“With the pound now worth so much less, there can be no other outcome than an unwelcome increase at the pumps from the current national averages of 113p for petrol and 114p for diesel,” RAC fuel spokesman Simon Williams said.
Market analysts have suggested the crash in the value of the pound last week could be down to negative news stories around Brexit.
It is thought that automated trading systems could have moved to sell the pound heavily after picking up coverage of French President Francois Hollande’s demands for “tough Brexit negotiations”.
Uncertainty surrounding the UK’s decision to leave the European Union has triggered instability in the value of the pound.
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Last week, Prime Minister Theresa May announced that Article 50 would be activated by the end of March next year to begin the Brexit process, causing further volatility in the pound.
According the figures from RAC Fuel Watch, a litre of diesel rose by 42p to 113.34p at the end of last month – the highest average cost since August 2015.
Meanwhile, average petrol prices were also up by 0.48p to 112.07p, just short of the 2016 peak of 112.33p.
The price rises mean filling up an average-sized family hatchback with petrol is over £5 more expensive than at the start of the year, while a tank of diesel is £4 more than in January.