Red diesel prices have fallen to the spot price of 38.5p (Monday 8 Dec), a drop of 4p on the same time last week, according to fuel company Total Butler.

The move follows the announcement by Morrisons that the supermarket has slashed the cost of domestic diesel to below the £1-a-litre mark, a move likely to intensify the forecourt price war.

The retailer said that all its pumps will be selling diesel at 99.9p a litre – down by up to 5p on the weekend and a drop of 34p from its July high.

From Tuesday, Asda will also reduce the price of its diesel to 99.9p a litre, with petrol coming down to 87.9p a litre.

Motoring group AA welcomed the news, predicting that other retailers would now follow suit.

Supermarkets have been leading the way in cutting the price of petrol, with Morrisons being the first to drop unleaded below the £1-a-litre mark in October and under 90p last month.

The announcement sees the chain knocking the price of diesel down by between 3p and 5p on its forecourts across the UK, meaning that drivers of a typical diesel family car will be more than £18 better off on a full tank of fuel than they were in July.