UK Fuel Price Crisis Escalates as Retailers Increase Margins, Prompting Calls for Action

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By Lydia Amazouz Published on 16 May 2024 12:42
UK Fuel Price Crisis Escalates as Retailers Increase Margins, Prompting Calls for Action
UK Fuel Price Crisis Escalates as Retailers Increase Margins, Prompting Calls for Action - © en.econostrum.info
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Supermarkets and other gas dealers have been charged with inflating their profit margins and pushing up UK fuel price to new highs.

UK Fuel Price Crisis: RAC Calls for Government Action on High Retailer Margins

The RAC has sent a letter to Claire Coutinho, the energy secretary, pointing out that retailer fuel margins are significantly greater than they ought to be.

Following the energy crisis brought on by Russia's invasion of Ukraine, which the Competition & Markets Authority (CMiA) estimated cost drivers £900 million, it was discovered that gas retailers had increased their profit margins.

The RAC, however, stated that it thinks merchants are still taking advantage of drivers and is requesting government intervention to address “unreasonably high” margins and prices.

According to RAC Fuel Watch data, the margin on diesel has risen to nearly 18p per litre last week, after exceeding 15p on April 22. The profit margin on gasoline has averaged 10p this year and is currently close to 12p per litre.

These figures, which represent the difference between what merchants pay for petrol and what they sell to customers, are significantly higher than the long-term average for both fuels, which is merely 8p.

Margins have increased even further in the recent week as the cost of oil has fallen dramatically from roughly $90 per barrel to $83 per barrel, lowering wholesale gasoline prices.

The average UK fuel price is 150p per litre, while diesel is 157p. If retailers were to be more fair to drivers, the RAC believes both fuels should be sold for roughly 145p, given that they have been priced nearly identically on the wholesale market for over two weeks.

The Government is attempting to address high retailer margins by increasing competition through its proposed mandatory Pump Watch fuel price transparency initiative and the establishment of a price monitoring organization.
Ahead of that, it is presently running a voluntary plan in which 14 of the largest merchants provide daily pricing for all of their websites.

RAC Advocates for Strong Price Monitoring Body Amidst Fuel Price Concerns

The RAC supports the program, but has informed the Secretary of State that it feels a strong price monitoring body is essential for fostering competition and holding retailers accountable.

Simon Williams, RAC fuel spokesman, stated, “We feel the current margins being charged by larger retailers in particular are extremely unfair on drivers struggling to get by in the cost-of-living crisis.

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“The big four supermarket retailers, which dominate fuel sales, are once again flatly refusing to cut their prices in the wake of much lower wholesale costs. If they were being fair on drivers, they should already have shaved at least 5p off their current petrol average of 147p and 8p off diesel, which averages 154p at a supermarket forecourt.
“Our data shows the supermarkets are taking about 11p a litre on petrol and 16p on diesel compared to 3p and 8p in 2019.
“We realise that supermarkets, along with all businesses, have been affected by inflation, but these increases seem blatantly unfair. And, of course, without them cutting their prices, there is little incentive for other retailers to follow suit.
“Having tracked fuel prices against consumer inflation, it’s easy to see the link between the two. We therefore have a strange situation where unreasonably big fuel margins are making inflation higher than it should be.
“It’s very concerning to see fuel margins at such high levels, particularly as this is happening under the close eye of the CMA and while retailers are voluntarily sharing their forecourt prices with the intention of increasing competition.
“If the work of Department for Energy Security and Net Zero and the CMA has had any effect to date on improving fuel price transparency, we ought to see prices at the pumps reduce significantly in the next week due to a sustained drop in the cost of oil.
“Sadly, we fear retailers are likely to need a little more encouragement before this happens.
“The RAC believes the situation will only be improved in the long term if the CMA as the price monitoring body is able to take meaningful action against retailers whose margins are deemed not to be mirroring significant reductions in the cost of wholesale fuel.”
In response to this criticism, the Petrol Retailers Association said fuel stations are “operating on razor-thin margins” and trying to offer the best deal possible while dealing with increases in fixed costs.

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