The biggest supermarket chains are all cutting their fuel prices.

With world oil prices plunging, Asda, Sainsbury's, Morrisons and Tesco are all reducing their petrol by 2p a litre and their diesel by 1p a litre.

The Asda cut means its customers will pay no more than 110.7p a litre for petrol, with the company's diesel costing 117.7p a litre.

This is the latest in a series of fuel-price reductions by supermarkets over recent weeks.

The RAC has said that petrol could dip below £1 a litre in the new year, which would take prices at the pumps to their lowest level since the end of May 2009.

Commenting on the possibility of lower pump prices, RAC fuel spokesman Simon Williams said: "What's currently happening at the pumps with falling fuel prices is something many motorists will not remember seeing before.

"Talk of prices going up like a rocket and falling like a feather could not be further from the truth as retailers have been quick to pass on savings at the forecourt since we forecast on December 6 that prices were due to come down by 7p a litre for petrol and 6p for diesel."

AA president Edmund King was more cautious. He said: "With duty on each litre of fuel at 57.95p and VAT around 20p, plus the pound at its lowest level against the dollar for three months, it would take another almighty drop in crude prices to reach £1 a litre at the pumps.

"Drivers would love to see £1 per litre but a white Christmas might be a better bet at the moment. However, for canny drivers there are still variations in pump prices of up to 5p litre in the same town. So shop around and make the most of the lower prices."