Despite recent drops, fuel prices across the UK remain significantly elevated, leading many motorists to question why they are still paying so much at the pump. The Competition and Markets Authority (CMA) has pointed to high fuel margins as the primary reason behind the persistently high costs, raising concerns about the competition within the fuel retail market.
According to the CMA's latest monitoring reports, average costs for petrol and diesel fell slightly from June to October 2024, with averages reaching 134.4 pence per litre for petrol and 139.7 pence for diesel. These figures reflect decreases of 10.0 and 10.4 pence per litre respectively compared to previous months. Yet, even as the average prices dipped, the margins retailers make per litre of petrol soared.
To paint a clearer picture, the CMA revealed how these margins have evolved recently. For supermarket fuel margins, the percentage jumped from 7% back in April to 8.1% by August, highlighting a concerning trend. Non-supermarket retailers did not fare much differently, with margins climbing from 7.8% to 10.2% within the same timeframe.
Dan Turnbull, Senior Director of Markets at the CMA, stated, "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 remain concerned about weak competition in the sector and the impact on pump prices." This sentiment echoes the sentiments of the public, who feel the strain at the pump as they balance tight budgets.
Additional data from the CMA also offered insight on the retail spread, which is the difference between what drivers actually pay at the pumps versus what retailers pay for the fuel. The report indicated retail spreads were above the long-term average of 5-10 pence per litre, averaging about 14.9 pence for petrol and 16.3 pence for diesel. This demonstrates not only higher prices for consumers but also the prevailing issues with market competitiveness.
The government aims to tackle these issues, and the CMA has suggested implementing measures, including the development of the proposed Fuel Finder scheme. This initiative would leverage technology to help drivers locate the cheapest fuel at nearby stations, ideally fostering greater competition among retailers and thereby leading to lower prices for consumers. Turnbull mentioned, "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 elsewhere."
Critics argue, though, about the effectiveness of these strategies, particularly as big players like supermarket brands have effectively stepped back from aggressively competing on price. Historically, companies like Tesco and Morrisons supported lower fuel prices to attract customers to their grocery stores, setting benchmarks for surrounding retailers. The CMA noted, "Historically, retailers like Tesco and Morrisons would use low fuel prices to draw shoppers through their doors, prompting competitive pricing across the market." Now, with key competitors reducing their focus on price competition, consumers are left vulnerable.
These increasing margins not only reflect high fuel costs but also the impact of broader economic pressures contributing to higher operational costs faced by retailers, including surging energy prices, national insurance hikes, and increased wages. Despite these operational factors, the CMA contends they do not justify the sustained increases observed.
Luke Bosdet, the AA’s spokesman on road fuel prices, noted the frustrations of many drivers. He stated, "The CMA reporting continuing inflation of fuel margins for extra profit will stir anger once again, particularly against the backdrop of the continuing fuel duty freeze by the government. Drivers feel the pinch at every turn, so this news is unlikely to be well-received."
Looking toward easing the financial burden on consumers, RAC head of policy Simon Williams expressed hope for the Fuel Finder scheme to shake up the market. He stated, "We hope the introduction of the government-backed fuel finder scheme next year will succeed in driving new competition and help drivers all around the UK secure fairer prices." But for now, many drivers may need to rely on mobile apps such as the free myRAC app to help them identify the best deals around.
While the government is making moves aimed at encouraging market transparency and promoting fair pricing, it remains to be seen how effective these changes will be and how quickly consumers might benefit from improved pricing on fuel. For now, the hefty margins being pocketed by fuel retailers leave many Britons questioning the fairness of the fuel market and struggling to keep their wallets from feeling the squeeze.
