Despite both petrol and diesel prices declining between June and July this year, the Competition and Markets Authority’s (CMA’s) latest report found forecourts could still be charging less.
On average, petrol prices fell by 10 pence per litre (ppl) to 134.4ppl in the three-month period, while diesel dropped by 10.4ppl to 139.7ppl by the end of October across all fuel retailers.
The CMA attributed this fall to the wholesale cost of ‘refining spreads’ – the difference between the price of crude oil and products such as gasoline – and crude oil coming down.
It also noted the reduction of those prices was driven by global factors that are out of retailers’ hands.
However, the profit margins retailers opt for, known as retail spreads, were almost triple the long-term average.
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Instead of the 5-10ppl level of profit, the gap in the price retailers buy petrol at compared to what it sells for was 14.9ppl. For diesel, this was around 16.3ppl. This is an ongoing trend among fuel retailers that has continued since 2020, “indicating a lack of retail competition in the sector”, according to the CMA.
Since the Government watchdog’s last update, the margins among supermarkets have continued to rise. Between May and August, Tesco, Asda, Morrisons and Sainsbury’s had an average profit margin of 8.1%, which rose from the previous four months of 7.6%.
Of the supermarkets, Sainsbury’s and Tesco had adopted a ‘passive’ pricing policy that didn’t react to the wholesale cost changes of fuel.
This meant drivers at the supermarkets’ forecourts would have paid more to fill up their tanks.
The fourth CMA report into fuel prices noted: “Overall, retail spreads and margins remain high compared to historic[al] levels – as has continued to be the case for most of the period since our market study.
“As at the time of our market study, the CMA thus remains concerned about the intensity of retail competition between fuel retailers. We estimate that the increase in retailers’ fuel margins compared to 2019 resulted in increased fuel costs for drivers in 2023 of over £1.6bn.”
Competition among fuel retailers is hoped to increase by the end of 2025, when motorists will be able to access real-time prices as part of the soon-to-be-launched ‘Fuel Finder’ scheme.
As part of the ‘Pumpwatch’ scheme, the prices will be accessible on price comparison sites as well as on navigation apps like Google Maps.
Drivers will be able to check where their cheapest option is for petrol or diesel, with it being mandatory for retailers to update their prices as they change.
‘Drivers paying more than they should be’
Dan Turnbull, senior director of markets at the CMA, said: “While fuel prices have fallen since July, drivers are paying more for fuel than they should be as they continue to be squeezed by stubbornly high fuel margins. We therefore remain concerned about weak competition in the sector and the impact on pump prices.
“With that in mind, we are pleased the Government is progressing with our recommendations. These measures will empower drivers to find the cheapest fuel prices wherever they are in the UK, increase competition and support the economy – the more people save on fuel, the more they have to spend in other areas.”
Meanwhile, Simon Williams, the RAC’s head of policy, said: “It’s disappointing to hear that the CMA is still concerned about competition among fuel retailers and that margins remain higher than historic[al] levels.”
Williams added: “We hope the introduction of the Government-backed ‘Fuel Finder’ scheme next year will succeed in driving greater competition and enable drivers all around the UK to benefit from fairer prices.”
