UK fuel prices: drivers still significantly overcharged despite drop

UK fuel prices: drivers still significantly overcharged despite drop



Filling the tank of a 55-litre family car, such as a Skoda Superb, costs nearly £90 for diesel, says the RAC

Despite significant November price drops, drivers are still being overcharged for fuel

Prices for petrol and diesel fuel dropped significantly in November, but the RAC says drivers have lost around £184 million in the last two months due to unfair pricing. 

Average petrol prices dropped by 7.5 pence per litre (ppl) down to 146.95p. Diesel, meanwhile, fell from 7p to 154.4p, but prices are still significantly higher than they should be. 

The RAC says drivers are still being significantly overcharged on retailer forecourts, with prices for petrol around 10p higher than they should be, compared to 5p for diesel. 

The motoring organisation says this is because “lower wholesale prices are not being passed on by retailers to drivers at the pumps”. It figures also suggest the average retailer margin on petrol is 17ppl, compared to 13ppl for diesel. 

Because of the inflated prices, it means it costs drivers around £5 more to completely refuel an average family car with a 55-litre fuel tank, for a total of £80.62. This compares to a total of £84.92 for diesel. 

“While the price of fuel fell in November, the truth is there is no reason whatsoever for drivers to be jubilant as the data clearly shows they are continuing to get a rough deal at the pumps, unless they live in Northern Ireland,” said Simon Williams, fuel spokesperson for the RAC.

“This is extremely worrying as the biggest retailers don’t seem to have heeded the warnings levelled at them by Energy Secretary Claire Coutinho at the end of October saying she wouldn’t hesitate to call out those that rip off the public.

“While the Energy Secretary’s action may have encouraged retailers to begin reducing their prices, it’s undoubtedly a case of far too little, far too late. The wholesale market data the RAC analyses shows the true picture and unfortunately, for the Government and drivers, it shows the 5p-a-litre duty cut is not getting to drivers at all, and prices aren’t falling nearly fast enough yet again.

“We’ve contacted her department to explain what’s really going on with a view to prompting greater and more effective intervention. If a price monitoring body had already been set up by now – as recommended by the Competition and Markets Authority and accepted by the Government – then this might have been prevented and people might finally be getting a fairer deal at the pumps.

London was highlighted as the most expensive location to buy both petrol and diesel in November, while Northern Ireland provided the lowest prices for both sources of fuel. 

The RAC urged petrol retailers to lower prices, but the Petrol Retailers Association argued it is “doing all it can to ensure that motorists have access to the best information possible”. 

“It is disappointing that as we work constructively with the relevant Government departments to find a solution, we are forced to constantly correct the record,” said Gordon Balmer, executive director of the Petrol Retailers Association (PRA), in a statement sent to Autocar. 

"Our independent retailers operate in a dynamic market, consistently striving to provide fair and competitive prices to consumers… The PRA has offered its full support and cooperation to the Competition and Markets Authority as it develops its fuel price transparency scheme to help motorists find the best deals available to them." 

The PRA added its “retailers remain steadfast in their commitment to ensuring customers receive the best deals possible.”

*Why are fuel prices going up?*

According to the RAC’s fuel watch, the rising prices at the pumps are due to the Organization of the Petroleum Exporting Countries (OPEC) reducing supply. The weaker value of sterling is also impacting costs.

The price of crude oil has gone up nearly $12 per barrel since the start of July to around $96 now. 

This has led to the wholesale cost of fuel – the price that retailers pay – going up, which in turn has been passed on to drivers on the forecourt. Should the price surpass $100, it would be the first time to do so since August 2022.

*What determines the price of fuel?*

The price of petrol and diesel you buy at the pump is largely determined by the wholesale price of Brent crude oil. 

Fluctuations in the price of this, however, can take weeks to filter through to the forecourts.

*The long-term cost of petrol*

In July 2023, a major report from the Competition and Markets Authority (CMA) found that drivers paid on average 6ppl more for fuel last year as supermarkets took advantage of weakened competition and inflated pump prices.

CMA chief Sarah Cardell, who said supermarkets were usually the cheapest place to buy fuel and market anchors, said the rising of prices would have had “a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.”

The report found the rise was instigated by Asda  – which was also fined £60,000 for not co-operating fully with the CMA investigation – and Morrisons, the two cheapest fuel sellers, which last year each made the decision to target higher margins. 

Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled its margin target in the same period. 

Other retailers, including Sainsbury’s and Tesco, didn't respond “in the way you would expect in a competitive market” and “instead raised their prices in line with these changes”, the CMA found.

“Taken together, this indicates that competition has weakened and reinforces the need for action,” the report added.

Diesel prices have also been slow to drop in 2023, partially down to Asda ‘feathering’ its prices (reducing them more slowly as wholesale prices fell) and other firms not responding competitively to that. 

The CMA estimated that drivers have paid 13ppl more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.

“Competition at the pump is not working as well as it should be, and something needs to change swiftly to address this,” said Cardell.

As such, the CMA recommended a "fuel finder scheme" to give drivers access to live, station-by-station fuel prices on their phones or sat-navs. This would “help revitalise competition in the retail road fuel market.”

Cardell added: “We need to reignite competition among fuel retailers. This [scheme] would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on sat-navs and map apps.”

The CMA also recommended bringing in a new monitoring body to “hold [the] industry to account.”

On this, RAC spokesman Williams said: “The fact that drivers appear to have lost out to the tune of nearly £1 billion as a result of increased retailer margins on fuel is nothing short of astounding in a cost of living crisis and confirms what we’ve been saying for many years: that supermarkets haven’t been treating drivers fairly at the pumps.

“It’s all about action now, and we very much hope the government follows through with both of the CMA’s recommendations. 

“While forcing retailers to publish pump prices is a positive step for drivers, what’s of far more significance is the creation of a fuel-monitor function within government which, we very much hope, actively monitors wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops. 

“Without this, we fear drivers will continue to get a raw deal."

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