Petrol stations are to be investigated over a failure to pass on falling wholesale prices to drivers, amid suspicions fuel retailers are using the war in Ukraine as cover to bolster their profits.
The Competition and Markets Authority said it has witnessed “rocket and feather” pricing for fuel, where prices rise sharply, like a rocket, to accommodate higher oil prices and other costs but then drop slowly like a feather as market prices fall back. Under this arrangement, retailers keep the difference between wholesale prices and pump prices as costs fall back.
“Between 2017 and 2021, the difference between the price retailers paid for fuel and the pump price (the “fuel margin”) rose by the equivalent of 2-3p a litre on diesel and 3-4p a litre on petrol,” the CMA found.
The watchdog said the rise could be a result of “the extreme volatility of prices and supply in 2022” but pledged to “investigate further.”
Brent crude oil hit highs of more than $125 per barrel in March in the wake of Russian President Vladimir Putin’s war and reached similar prices in June. Since then prices have declined and oil’s most recent value was closer to $80.
Prices for petrol reached record highs of almost 200 pence per litre over summer but have since fallen back, recently falling below 160 pence per litre.
Diesel drivers have suffered more enduring rises, the CMA said. The gap between the two fuels is the largest ever recorded, with a 24 pence premium for diesel.
Much of this is down to Western Europe’s reliance on diesel imports from Russia, which have been disrupted by Moscow’s attack on Ukraine.
RAC fuel spokesman Simon Williams said: “While it’s encouraging the CMA has found evidence of ‘rocket and feather’ pricing taking place this year, we believe there was clear evidence of it happening this time last year and in 2018 and 2019.
“Volatility has unquestionably been an issue in fuel pricing since Russia invaded Ukraine, but when wholesale prices trend down for weeks at a time drivers should see pump prices do the same at a similar rate.
“Unfortunately, our data shows that this is not often the case.”
The CMA also found evidence that areas with fewer petrol stations, and thus less competition, had higher fuel prices, particularly in areas with no supermarket-owned pumps.
Supermarkets often sell fuel on smaller margins than dedicated petrol station networks in order to lure shoppers to their stores.
Interim CMA Chief Executive Sarah Cardell said: “It has been a terrible year for drivers, with filling up a vehicle now a moment of dread for many.
“The disruption of imports from Russia means that diesel drivers, in particular, are paying a substantial premium because of the invasion of Ukraine. A weaker pound is contributing to higher prices across the board too.”
Higher energy costs have also contributed to rising petrol and diesel prices at the pump as driving up oil refining and distribution costs rise.
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