A Competition and Markets Authority (CMA) review into road fuel pricing has determined that retailers have been increasing their profits amid rising prices. The CMA, which monitors competition in industries, says recent price hikes have largely been down to “global factors” but retailers have also played their part.
According to the CMA, factors such as the Russian invasion of Ukraine are largely responsible for fuel price increases, but it acknowledges that “fuel margins” – the amount of profit retailers include in their prices – has increased over the past four years. The CMA says the issue is particularly prominent in supermarket petrol stations, and it has left average supermarket pump prices around 5p per litre higher than they would have been had margins remained at 2019 levels.
While a 5p-per-litre increase in fuel prices might not sound like much, it equates to a price rise of almost £3 for a driver filling a typical 55-litre fuel tank.
The CMA also says it is unhappy with the “level of engagement” with the study, claiming it is “not satisfied” that supermarkets have been “forthcoming” with evidence. In particular, the organisation says key evidence has only been received at a late stage after several rounds of information gathering.
What’s more, the CMA claims there may be “weaker competition” in the diesel market than for petrol since the beginning of 2023. Although the organisation recognises the “volatility” in diesel wholesale prices (the amount retailers pay to buy in the fuel), it says the high margins in 2023 “appear to have gone on longer than would be expected”.
The CMA made the comments in a progress report, designed to update the public on its investigation into road fuel pricing. The investigation was originally launched last summer, when then-chancellor Kwasi Kwarteng asked for an urgent investigation into the implementation of the government’s 5p-per-litre cut to fuel duty. At the time, there was concern that the cut, designed to tackle rising prices, was not being passed on to consumers.
In July 2022, the CMA said its initial investigation suggested the price cuts were being passed on, but it launched a full investigation after flagging “cause for concern” over fuel pricing and retailer profits. The organisation says the investigation is almost complete, and the findings are due to be published in July this year.
“The rising cost of living is putting people and businesses under sustained financial pressure, and the CMA is determined to do what it can to ensure competition helps contain these pressures as much as possible,” said Sarah Cardell, the chief executive of the CMA. “Although much of the pressure on pump prices is down to global factors including Russia’s invasion of Ukraine, we have found evidence that suggests weakening retail competition is contributing to higher prices for drivers at the pumps. We are also concerned about the sustained higher margins on diesel compared to petrol we have seen this year.
“We are not satisfied that all the supermarkets have been sufficiently forthcoming with the evidence they have provided in our road fuel market study, so we will be calling them in for formal interviews to get to the bottom of what is going on. It is a priority for the CMA to publish a full and final report, including recommendations for action, by the beginning of July.”
The Petrol Retailers Association (PRA), which represents petrol stations, said the market was “dynamic” and advised motorists to “shop around” for the best prices.
“The CMA have made supermarkets the focus of their update, noting only that non-supermarket retailers are traditionally price followers in the market,” said the PRA’s executive director, Gordon Balmer. “As noted by the CMA, petrol and diesel prices are still volatile due to the ongoing war in Ukraine. The market is very dynamic and independent forecourts are in many cases undercutting supermarkets on price. Our advice to motorists remains to shop around.
“We have cooperated with all of the CMA’s requests for information and will continue to do so as they prepare their final report to be released.”
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