The UK’s competition authority has issued a caution to fuel retailers regarding the pace at which fuel prices have decreased in recent times and the genuine level of competition in the market.
The Competition and Markets Authority (CMA) has already determined that last year, drivers were charged excessively for fuel. The agency expressed concern over the growing gap between the prices at the pump and the benchmark wholesale prices.
The CMA noted a marked increase in the retail margin for both petrol and diesel during September and October. By the end of October, the margin had risen significantly above the historical average of 5-10 pence per litre (ppl).
It is normal for the retail margin to fluctuate with changes in wholesale prices. However, if retail competition is functioning properly, pump prices should align with wholesale prices over time.
The CMA would be troubled if the current elevated retail margins persisted, as it could indicate a lack of vigorous competition in the retail sector.
Since May, petrol prices have climbed by 11p and diesel by 13p. Motorist organizations attribute this to retailers increasing their margins, although the CMA has indicated it requires more evidence to confirm this.
Sarah Cardell, the CMA’s chief executive, stated: “The data presents a complex scenario regarding the factors influencing this trend. While wholesale costs increased over the summer, recent patterns suggest that competition may not be effectively keeping pump prices in check. We will continue to monitor this and provide an update in our forthcoming report.”
Luke Bosdet of the AA was more direct, stating: “The fuel industry is reverting to old patterns.” He criticized the industry for not fully passing on reductions in wholesale costs to consumers, especially during a cost-of-living crisis, and emphasized the need for greater price transparency as demanded by motorists.
