Luke Bosdet, the AA’s fuel price spokesman said E10’s “lower fuel efficiency” means petrol stations were selling more fuel”. However, the AA warned forecourts were still not directly passing over savings to customers.
The AA said the launch of E10 fuel did lead to a slight drop in wholesale petrol prices.
But retailers continue to charge their customers at higher rates despite them saving around 1.5p per litre less for petrol than under the new compound.
Mr Bosdet said: “We now know that the switch to E10 petrol (10 percent ethanol) on 1 September saw the wholesale price of petrol drop by more than 4p a litre overnight.
“However, much of that saving was lost as Hurricane Ida’s enduring impact on the southern USA’s oil and fuel production sent the price of oil from around $66 a barrel in the third week of August to above $73 in September.
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According to the AA, petrol prices are now at an eight-year high since the new fuel has launched.
On Sunday morning, motorists paid on average 135.51p per litre, the highest rate since September 2013.
The AA has also warned petrol retailers and supplier margins have grown to their largest amount since November.
Average diesel prices were also slightly up across the UK with rates now standing at 136.80p.
This would work out at around £1 more when refilling a 50-litre fuel tank.
The Government’s report found E10 fuel has a slightly lower energy content which could lead to drivers topping up more often.
Owners of older models are also facing higher rates as a result of the switch.
They have been forced to use E5 fuel which is now available in the more expensive Super Unleaded grade.
Experts at Vertu Motors have warned this has seen prices rise by up to £6 to fill up a 55-litre tank.