Retail Fuel Prices in Britain Remain High, Says CMA
The Competition and Markets Authority (CMA) announced on Friday that retail fuel margins in Britain are significantly above historic levels. The CMA called on the government to introduce a price comparison scheme to address the issue. The update comes a year after the CMA published its final report on the road fuel market study, which highlighted the need for a mandatory fuel finder scheme and a monitoring body to regulate fuel prices. The CMA will assume the role of the monitoring body, but legislation for the fuel finder scheme was not completed before the general election.
According to the CMA’s interim update, while there has been some volatility in recent months, the overall picture shows sustained higher road fuel prices and margins compared to historic levels. In the four months leading up to June, petrol retail spreads averaged 12.62 pence per litre (ppl), more than double the average of 6.51 ppl from 2015 to 2019. Diesel retail spreads during the same period averaged 17.91 ppl, also more than double the average of 8.61 ppl from 2015 to 2019.
The CMA stated that supermarket fuel margins have remained relatively unchanged compared to a year ago, while non-supermarket fuel margins have slightly decreased. The watchdog estimated that the increase in retail fuel margins since 2019 has cost drivers over £1.6 billion in 2023 alone. Additionally, the higher margins result in increased VAT on fuel, which accounts for 20 percent of all costs combined, including wholesale price, distribution cost, retailer margin, and fuel duty.
While the CMA acknowledged that its report did not consider the rise in operating costs that retailers claim to have experienced, it also noted that operating costs have not been found to be a driving factor in the increase in average fuel margins for large retailers. The watchdog plans to reassess this issue when it assumes its new permanent monitoring function with compulsory information-gathering powers.
Last year, the CMA recommended the implementation of a mandatory fuel finder scheme that would require retailers to make their prices available in real time, allowing drivers to access them via satellite navigation or map apps. However, before new legislation can be passed, the CMA has established a temporary voluntary scheme for retailers to provide price information. However, the CMA stated that this scheme only covers about 40 percent of retailers and falls short of the comprehensive, real-time, station-by-station data needed to empower motorists and drive competition.
Sarah Cardell, CEO of the CMA, called on the government to legislate for a real-time fuel finder scheme to promote competition among retailers. She believes that such a scheme would give drivers the ability to compare fuel prices wherever they are, ultimately benefiting consumers. The RAC motoring group expressed its support for the CMA’s report, with Simon Williams, the head of policy at the RAC, stating that drivers feel ripped off by fuel retailers. He highlighted that drivers have paid £1.6 billion more than necessary in the past year, which is particularly concerning considering the number of people reliant on their vehicles.
The British Retail Consortium (BRC) responded to the report by emphasizing that supermarkets aim to offer value across all products, including food and fuel. Helen Dickinson, Chief Executive of the BRC, stated that retailers will continue to work closely with the CMA and provide the necessary data to enable consumers to find the best prices for petrol and diesel.
As of Friday, the average petrol price was 144.83 pence per litre, including costs of 53.3 pence, a retail margin of 13.46 pence, and approximately 78.1 pence in fuel duty, VAT, and green levies. The average diesel price was 150.01 pence per litre, including costs of 56.5 pence, a retail margin of 14.53 pence, and around 78.98 pence in taxes.
The CMA’s findings highlight the need for increased transparency and competition in the retail fuel market in Britain. By implementing a real-time fuel finder scheme, drivers would have access to up-to-date pricing information, enabling them to make more informed decisions and potentially find better deals. This scheme would level the playing field by empowering consumers and promoting competition among retailers.
Furthermore, the CMA’s call for legislation to mandate the price comparison scheme demonstrates the need for government intervention to address the issue of high retail fuel margins. By enforcing a mandatory scheme, the government can ensure that all retailers participate and provide the necessary data, offering consumers comprehensive and accurate information.
It is worth noting that while the CMA did not consider the rise in operating costs reported by retailers, it also found that these costs have not been a major driver of the increased fuel margins. This suggests that other factors, such as market dynamics or pricing strategies, may be contributing to the higher margins. The CMA’s upcoming reassessment of this issue will provide valuable insights into the underlying causes and help determine appropriate measures to address them.
Overall, the CMA’s report sheds light on the persistent issue of high retail fuel margins in Britain. The government, in collaboration with the CMA, needs to take swift action to implement a real-time fuel finder scheme and ensure that retailers are held accountable for providing transparent and competitive pricing. By doing so, drivers can benefit from fairer fuel prices, and the market can become more efficient and consumer-friendly.
