Fuel retailers continue to pocket higher-than-normal margins on every litre of petrol and diesel sold to drivers following an investigation by the competitions watchdog that found they had been inflating their prices to the detriment of hard-up motorists.
During September and October, drivers were hit by ‘significant increases’ in operator margins when calculating the differences between pump prices and the wholesale price of both fuels, according to an update from the Competition and Markets Authority.
Motoring groups have responded this morning with the AA saying ‘old habits die hard in the road fuel trade’ and the RAC accusing retailers of ‘taking advantage of drivers at the pumps’.
A fresh update from the Competition and Markets Authority has said drivers were hit by ‘significant increases’ in fuel retailer margins in September and October, despite the watchdog’s recent investigation into the sector accusing operators of inflating their prices
The CMA’s update published today said: ‘During September and October, we have seen significant increases in retail spread [margins] for both petrol and diesel.
‘In both cases, the retail spread at end-October was significantly above the long-term average.
‘While the retail spread does increase and decrease in response to volatility in wholesale prices, we would expect these spreads to begin returning to normal levels.’
The report, which is part of the CMA’s commitment to continue monitoring the road fuel retail market, went on: ‘If retail spreads were to remain at these levels for much longer, this would cause concern about the intensity of retail competition in the sector.’
It also found that supermarket fuel margins in 2023 have been higher than previous years on a percentage basis, though they are slightly down on 2022 on a pence-per-litre (ppl) basis, due to lower wholesale costs.
However, since August, supermarkets have been pocketing bigger margins than the pre-2021 average – and these have increased during September and October.
Yet supermarkets are returning to being the cheapest forecourts to fill up, based on data from May to September, with the report adding that it has seen ‘fewer cases of non-supermarket retailers being cheaper than the supermarket average’.
The watchdog said that there are still concerning signs emerging from the road fuel retail sector and it will be monitoring pricing to see if there is further evidence of ‘rocket-and-feather’ pricing (when wholesale price increases trigger instant pump price rises, but falling wholesale costs aren’t reflected as quickly at forecourts) in the run-up to the busy Christmas period.
Luke Bosdet, from the AA, said retailers’ failure to pass on full savings from lower wholesale costs to hard-pressed motorists, their families and businesses is ‘unacceptable’ in a cost of living crisis.
He added the Government needs to speed up the legislation that creates the statutory fuel price transparency scheme – something recommended as part of the CMA’s initial probe into the sector published earlier this year.
‘The AA has been testing public responses to the profiling of cheapest pump prices across an area or along a route. The feedback from drivers is that they want more transparency,’ he said.
The RAC also waded in on the road fuel retail sector, saying the CMA’s latest findings were ‘very disappointing’ and demonstrate that ‘drivers are still being taken advantage of at the pumps’.
It recently accused Britain’s biggest fuel operators of taking an additional 5p for every litre of petrol sold to drivers, which is equivalent to businesses pocketing the Government’s 5p duty cut brought in shortly after Russia’s invasion of Ukraine last year to help struggling families cope with the cost-of-living squeeze.
Simon Williams, from the RAC, said: ‘It’s very disappointing that the CMA has found that major fuel retailers are still taking far bigger margins than they have done in the past, something we have been saying for a long time, as this means drivers are still being taken advantage of at the pumps.
‘While supermarket margins may have fallen in the summer, our latest data shows they have more than made up for this since then and are currently taking very large margins.
‘Even though off the back of the CMA report in the summer the largest retailers are now voluntarily publishing their prices daily for app-makers to use, our data shows this has had no effect whatsoever in improving competition and lowering prices. In fact, we believe the situation is currently worse than ever as the wholesale fuel market is down significantly, yet forecourt prices are falling like the proverbial feather.
‘It’s blatantly clear to us that a price monitoring body – as recommended by the CMA – is desperately needed as major retailers cannot be trusted to price fuel fairly for their customers.
‘But unless this body has the power to take action against major retailers that don’t lower prices quickly enough in a falling wholesale market, we fear little will change even then.’
Gordon Balmer, executive director of the Petrol Retailers’ Association representing independent forecourts across the UK, also responded to the report, telling This is Money: ‘We are pleased to see the depth of participation in the CMA’s interim fuel price transparency scheme. We will continue to work closely with the CMA as they develop their permanent scheme.
‘With the volatility of the global fuel market, it is important that motorists are given the opportunity to search for the cheapest prices available to them. As always, I would encourage motorists to shop around to find the best deals possible.’