Pump prices fail to reflect ‘enormous wholesale price drops’
The 18p drop in petrol only came a month after the wholesale costs tumbled, as drivers paid a peak 166.54p a litre at the end of October, according to RAC data.
However, for diesel drivers, wholesale prices plummeted by 32p a litre over eight weeks, yet average pump prices only came down by 20p, after peaking at 190.41p.
It said that by not fully reflecting wholesale price drops and keeping pump prices artificially high, retailers make more money out of drivers from every litre they sell.
In 2022, the average retailer margin on petrol was 13.5p a litre (supermarkets 10.8p), significantly higher than the 8.7p it was in 2021 (supermarkets 5.8p).
Meanwhile, the average diesel margin last year was 10.3p (supermarkets 7.5p), up from 8.8p in 2021 (supermarkets 6p). Prior to the pandemic, in 2019 average retailer margins were just 6.5p for petrol and 6.9p for diesel.
‘Rocket and feather pricing’
While pump prices have been falling, the RAC said these reductions have “ground to a halt this week” due to wholesale prices starting to slowly rise again, “bringing retailer margins back to more normal, fairer levels”.
“The fear now is that retailers waste no time in putting pump prices back up despite there being no justification for doing so,” the RAC said.
RAC fuel spokesman, Simon Williams, said: “Our data shows that when wholesale prices increase, pump prices tend to rise very soon afterwards. Yet, when wholesale prices fall it takes far longer for forecourt prices to come down. This is the ‘feather’ element of what’s commonly known as ‘rocket and feather’ pricing.
“Wholesale fuel prices plummeted from the middle of October last year, yet supermarkets – which dominate fuel retailing in the UK and as a result buy new supplies very frequently – took weeks to begin cutting prices in a serious way. What’s more, not only were they slow to pass on wholesale price reductions, cutting prices by less than 2p a week over the course of three months, they also didn’t go far enough, especially when it came to reducing the price of diesel on their forecourts.”
Are retailers taking advantage of motorists?
Williams added that the question now is whether retailers start to “bump up their prices”.
“Looking at current wholesale costs there is absolutely no justification for pump prices to rise. If pump prices do rise in the coming days, this will be further evidence of the biggest retailers taking advantage of motorists,” he said.
He said that the group is urging the Government to focus on ensuring retailers quickly pass on savings to drivers every time there is significant downward movement in the wholesale price of fuel.
“Not just to ensure drivers aren’t treated unfairly, but also because there is a clear correlation between high fuel prices and higher levels of inflation,” Williams added.
The Competition and Markets Authority is currently conducting a review of fuel pricing.