4 minute read
Cover Story: Fuel prices
by 55 North
Exonerated
A CMA review of the road fuel market has concluded that on the whole the retail market seems to be competitive, but there are some areas that warrant further investigation.
review of competition in the road fuel market has found “cause for concern” in the growing gap between the price of crude oil when it enters refineries, and the wholesale price when it leaves refineries as petrol or diesel.
The review by the Competition and Markets Authority (CMA) found the main drivers of increased road fuel prices are the rising cost of crude oil, and a growing gap between the crude oil price and the wholesale price of petrol and diesel – the so-called ‘refining spread’.
The ‘refining spread’ tripled in the past year, growing from 10p to nearly 35p per litre. Over the same period, the so-called ‘retailer spread’ – the difference between the wholesale price and the price charged to motorists – fluctuated but remained about 10p per litre on average.
The review also found that on the whole, the fuel duty cut appears to have been implemented, with the largest fuel retailers doing so immediately and others more gradually.
It also found that there are significant differences in price between many rural and urban areas.
In light of some of the concerns found and the urgency of the situation, the CMA has launched a market study that will examine the road fuel market in more depth, making full use of its compulsory information-gathering powers. An interim update will be published in the autumn.
The CMA was also asked by the UK government to advise on possible measures to increase the transparency that consumers have over retail prices. The review sets out how an open data scheme could help consumers more easily access and compare local pump prices. There may also be merit in providing more information about prices on motorways, the review found.
Sarah Cardell, CMA General Counsel, said: “On the whole the retail market does seem to be competitive, but there are some areas that warrant further investigation. These include finding out whether the disparities in price between urban and rural areas are justified.
“This area of work is a major priority for the CMA and if we can help, we will.”
The CMA review has been welcomed by the ACS. Chief executive James Lowman said: “We are pleased that the CMA have acknowledged that retailers did pass on the duty rate cuts to drivers even when wholesale prices were rising. We will continue to engage with the CMA in their formal market study into the fuel market.”
Meanwhile, the Petrol Retailers Association said it was reassured by the findings of the review.
Executive Director Gordon Balmer said: “In recent months, we have seen motoring organisations and politicians attempting to scapegoat petrol retailers. This report exonerates petrol retailers and leaves unanswered questions about the extent to which these critics understand the retail fuel market at all.”
Balmer continued: “We are confident that this report will reassure motorists that petrol retailers are doing their best to keep their communities fuelled and fed, while operating on tight margins.”
Meanwhile, the RAC welcomed the CMA review, but urged the government to ensure it’s in a position to scrutinise the relationship between wholesale and retail prices.
Fuel spokesman Simon Williams said: “Regardless of the reasons for wholesale prices being what they are we continue to believe there is clear evidence, not least in the last week, that major retailers are incredibly slow to pass on falling wholesale costs, yet quick to pass on rising ones. The idea of allowing drivers to more easily compare pump prices near them may also prove beneficial.
“The question drivers may have, however, is how long the review will take and when they might see a change to what they pay every time they fill up. As each day goes by and the costof-living crisis is felt ever more keenly, the need for retailers to reflect wholesale prices fairly becomes ever more urgent.”
