Higher fuel prices attributed to rising oil refining margins

Rising oil refining margins are one of the main causes of rising fuel prices, according to the competition watchdog.

A review by the Competition and Markets Authority (CMA) found that the increase in the price of crude when it enters refineries at wholesale price when it leaves them as petrol or diesel has more than tripled in the last year, from 10 pence per liter to almost 35 pence per litre.

It said retailers’ margins “remained around 10 pence a liter on average” over the same period.

The CMA also attributed record fuel prices to an increase in the cost of crude.

On the question of whether the 5 pence a liter reduction in fuel tax introduced in March was passed on to drivers, the regulator said: “Overall the fuel tax cut appears to have been implemented, and car retailers Larger fuel tanks do it right away. and others more gradually”.

Figures from data firm Experian show the average price of a liter of petrol at UK service stations on Thursday was 190.8 pence, with diesel at 198.6 pence per litre.

That’s an increase of around 60 pence for petrol and 64 pence for diesel over the last 12 months.

The CMA noted that there are “significant differences” in pump prices between many rural and urban areas.

It also set out how an open data scheme could help consumers more easily compare prices at local petrol stations.

The regulator has launched a market study that will delve into the sector.

CMA General Counsel Sarah Cardell said: “The recent increases in pump prices are a major concern for millions of drivers.

“While there is no escaping global pressures driving up fuel prices, the widening gap between the price of oil and the wholesale price of gasoline and diesel is cause for concern.

“Now we need to get to the bottom of whether there are legitimate reasons for this and, if not, what steps can be taken to address it.

“In general, the retail market appears to be competitive, but there are some areas that warrant further investigation.”

She said the watchdog will “use our formal legal powers” to investigate pump prices, and “will not hesitate to take action” if it finds evidence of “collusion or similar irregularities”.

A spokesman for UKPIA, a trade association representing the fuels sector, including refiners, said the review was “completed quickly” and pledged to continue “working constructively” with the CMA and the Government “to fully understand the issues.” that have been identified. ”.

It continued: “As the review’s findings show, the UK generally benefits from a competitive domestic supply chain and prices tend to be more affected by changes in crude oil prices and other supply and demand factors, which have been particularly volatile in 2022. .

“The tax is also a significant cost, accounting for a large proportion of the price of the pump.

“We would like to point out that, when taxes and fuel levies are excluded, UK petrol and diesel prices have consistently been among the lowest in Western Europe.”

RAC fuel spokesman Simon Williams said: “We are particularly pleased to see the CMA acknowledge that the gap between wholesale and retail prices has widened in recent weeks.

“Regardless of the reasons why wholesale prices are what they are, we continue to believe there is clear evidence, particularly in the last week, that major retailers are incredibly slow to pass on falling costs to wholesale. , but quick to transfer the growing ones.

“The idea of ​​allowing drivers to more easily compare pump prices near them can also be beneficial.

“However, the question drivers may have is how long the review will take and, more importantly, when they might see a change in what they pay each time they fill up the tank.”

Jack Cousens, the AA’s head of road policy, said price competition at gas stations is “broken” as supermarket fuel retailers no longer trigger widespread price cuts by being the first retailers to pass on reductions. of wholesale costs.

That trigger seems to be gone, and now another way needs to be found to reinvigorate pump price competition, he said.

“Therefore, the AA welcomes the CMA’s suggestion for more transparency on pump prices immediately.”

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