Fuel prices in the UK have taken a worrying turn, as revealed by the latest findings from the Competition and Markets Authority (CMA). Recent data shows a significant surge in pump prices, prompting scrutiny into the margins and spreads maintained by retailers.
UK Fuel Retailers' Margins Soar: The CMA Report Raises Concerns
The Competition and Markets Authority's (CMA) 2022 assessment revealed that retailers' fuel margins, representing the difference between what they charge and what they pay, remain significant.
It was shown that supermarket margins, which were 4% in 2017, climbed to 7.6% in 2022 and 7.8% in 2023.
The margins for other merchants were 6.4% in 2017; they increased to 7.3% in 2022 and 9.1% in 2023.
The comparison is not like-for-like since the fuel margin data for 2023 are based on the calendar year because the financial year is still in progress, while other yearly figures are based on the financial year. Nevertheless, the CMA stated that its most recent research provided a "strong indication of competition issues" in the industry.
It described the steady rise in gasoline margins as "concerning," but upheld the "validity" of a major result of its market analysis, which was that overall competition in the road fuel retail sector had diminished.
The study covers the period from the end of October of last year to the end of February of this year for fuel costs at the pump.
CMA Warns of Rising Fuel Prices Amid Concerns Over Retail Margins
Between late October and late January, the price of petrol decreased by around 14 pence per litre (ppl), to 139.39 ppl; but, between January and late February, the price of petrol increased slightly, to 144.73 ppl.
Diesel prices also decreased by 14 ppl to 147.93 ppl between late October and late January, but increased by almost 6 ppl to 154.53 ppl between January and late February, partly due to external factors such as fluctuating crude oil prices.
The retail spread, or the difference between the average price drivers pay at the pump and the benchmarked price retailers pay for fuel, was examined by the CMA from November 2023 to the end of February 2024. It was discovered that this was higher than the long-term average of 5–10 ppl, with petrol averaging 15.2 ppl and diesel averaging 15.15 ppl during this time.
The latest CMA report reveals a notable increase in the average margin for both petrol and diesel, rising from 12.3 ppl in the previous period (May to the end of October) to a higher level in the current assessment.
Dan Turnbull, senior director of markets at the CMA, stated: “Drivers are feeling the pinch as fuel prices have been edging up since January. We’re particularly concerned by high margins which indicate weakened competition and are not a good sign for drivers.
“Today’s report reinforces the need for Pumpwatch and statutory powers to be in place as soon as possible, to ensure competition is effective in this market and to get a better deal for UK drivers.”
RAC head of policy Simon Williams said: “We have long flagged the problem of some retailers inflating their margins on fuel, which has been to the severe detriment of drivers who are already having to cope with wider spiralling motoring-related costs.
“It’s extremely encouraging to see the Competition and Markets Authority keeping a close eye on this as it should make retailers think twice about upping their margins.
“We have recently provided our recommendations on what the fuel price monitoring function should track to best benefit drivers every time they fill up. We now need to ensure that this once-in-a-generation opportunity of guaranteeing fairer fuel prices isn’t missed.”