Petrol prices fell below £1 a litre yesterday for the first time since December as two of Britain’s supermarket chains pushed through some of the biggest price cuts seen on the forecourt.

Asda triggered a new pump price war by reducing prices by 5p a litre to 99.9p. It cut diesel prices by 6p a litre to 110.9p.

Morrisons followed suit immediately, taking petrol down by as much as 7p to 99.9p. BP pledged to match the prices at some sites.

British Airways and Virgin Atlantic announced that they would reduce their passenger fuel surcharges.

Crude was trading at $70.50 a barrel at one point yesterday in London, compared with more than $147 in July. The last time oil was trading at $70 a barrel petrol prices were almost 5p per litre cheaper.

The AA said the price war was a massive boost for millions of motorists, saving a two-car family an average of £40 a month compared with July. Last week Gordon Brown warned petrol retailers that he wanted the cheaper oil cost to be passed on to consumers “as quickly as possible”.

Tesco cut its forecourt petrol prices by 3p per litre over the weekend to an average of 102.9p and the oil giants Total and Esso followed its lead. However, the AA gave warning that it may be some time before motorists see further reductions.

Edmund King, the AA president, said: “We suspect that these new prices are right on the edge, if not below, the point that retailing petrol remains profitable. This will be hard for other retailers to match.”

BA said it would reduce its fuel levy on long-haul flights for economy class passengers but left charges for business class customers unchanged.

From midnight, the surcharge on return flights lasting longer than nine hours — such as Cape Town and Delhi — will fall from £218 per ticket to £192. On long-haul economy class journeys lasting less then nine hours, such as Heathrow to New York or Montreal, the surcharge will drop from £156 per return flight to £136.

Virgin Atlantic will cut surcharges for economy passengers on shorter routes from £78 to £68, while economy longer-route charges will dip from £109 to £96. Premium economy charges on shorter routes drop £5 to £83 and come down £6.50 to £114.50 on longer routes.

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