Sainsbury's follows Tesco, Asda and Morrisons in cutting diesel prices to below £1

UK supermarket Sainsbury's announced it will kick off the new year by cutting diesel prices to under £1 a litre on Monday (4 January).Troubled grocer Morrisons already cut the prices on 3 January and was shortly followed by Asda and Tesco.

British automotive service RAC has said the price cut was slightly overdue. The price of diesel has fallen to around two pence below the price of petrol, which is usually cheaper than diesel.

"Diesel drivers will clearly welcome this move by the big supermarkets, although it would be fair to say it has been slow in coming," RAC fuel watch spokesman Pete Williams said in a statement.

"The focus has been on the price of petrol but with more diesel sold in the UK the retailers should be more transparent and reflect the savings they are making in the wholesale price more swiftly at the pump. And right now diesel is cheaper than petrol."

Walmart-owned Asda slashed its prices by 3p per litre to 99.7p (€1.35, $1.47) after Morrisons held the same price. Tesco, too, has its prices at 99.7p while Sainsbury's sells the fuel for 99.9p per litre.

This means all Big Four UK supermarkets have cut their diesel prices below the £1 level. The grocers hold a total of around 1,500 stations across the countries. In mid-December, the stores already cut their petrol selling prices to below £1 per litre.

Although oil prices have fallen to record lows, with Brent crude at its lowest point in more than 10 years, fuel selling prices are not very directly linked to the value of oil.

The majority of fuel revenue goes to the government in VAT and fuel duty, while refinery and distribution costs take up another part. Supermarkets also have their profit margins, leaving less room for the selling prices to move depending on oil value.

"It may have taken a while, but the dramatic drop in oil prices seen on the markets is finally beginning to filter through to customers," senior market analyst at Spreadex.com Connor Campbell commented.

"With unleaded petrol dipping below the £1 mark back in December, now diesel has joined its pump-peer, the Big Four supermarkets (with Morrison's taking the lead) pricing it under £1 for the first time since May 2009."