Fuel retailers give regulator ‘cause for concern’

The Competition and Markets Authority (CMA) has published its first report from the monitoring programme it's conducting to understand how fuel retailers are pricing petrol and diesel. Initial conclusions suggest - surprise! - drivers have been overpaying at the pump.

The report keeps an eye on the difference in wholesale and retail prices and has tracked pricing up to the end of October 2023. Since May this year, it's identified a trend showing the price of petrol increasing by 11 pence per litre. Meanwhile diesel is up by over 13 pence per litre.

This in and of itself wouldn't be cause for concern, but for the fact wholesale prices have been trending down. Ah.

The report said: “During September and October we have seen significant increases in retail spread 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. 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.”

The CMA also said profits of fuel retailers were higher than those in any year prior to 2021.

The regulator noted that participation by retailers was voluntary and there were some holes in its data where certain retailers haven’t cooperated, namely Moto-Way and Shell.

The report cited Asda as one supermarket showing ‘stronger price leadership’ (i.e. dropping their margins more keenly), but cautioned against overstating its position.

The monitoring continues for another eight months. Then? The basic premise seems to be that if retailers can’t self-regulate, the CMA will look to pass legislation to force more cooperation – something the government pledged to do by giving the regulator more powers to act.

Simon Williams, RAC fuel spokesperson, said: “It’s very disappointing the CMA has found 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.”

The whole report for a spot of reading, while you wait?