Petrol pricing is cause for concern: CMA warns
Petrol and diesel pricing will be investigated by the UK’s competition watchdog after it found “cause for concern in some parts” of the industry.
The Competition and Markets Authority (CMA) said it had discovered a sharp rise in prices once fuel had been processed by oil refineries.
It also found “significant differences in price” between forecourts in “many rural and urban areas”.
The CMA was asked to conduct an urgent review of the market by Kwasi Kwarteng.
The business secretary was concerned that a 5p fuel duty cut announced by the government in March was not being passed on to motorists. Both petrol and diesel prices have hit a series of records in recent weeks, fuelling the cost of living which is rising at the sharpest pace for 40 years.
Oil price volatility has worsened since February when energy giant Russia launched an assault on neighbouring Ukraine.
The CMA’s initial review found that “on the whole the fuel duty cut appears to have been implemented”.
However, the competition body will now begin an in-depth study of the market.
It said a main driver of rises was the growing gap between the price of crude oil before it goes into a processing plant compared to the price once oil refineries have processed it into petrol and diesel.
The difference between crude oil and the wholesale price of petrol and diesel had tripled in the past year from 10p to nearly 35p per litre.
“While there is no escaping the global pressures pushing up fuel prices, the growing gap between the oil price, and the wholesale price of petrol and diesel, is a cause for concern,” said Sarah Cardell, general counsel at the CMA.
“We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it.”
She added: “On the whole the retail market does seem to be competitive, but there are some areas that warrant further investigation. These include finding out whether the disparities in price between urban and rural areas are justified.”
Welcoming the report and the commitment to a fuller market review, the RAC said it was pleased to see that the CMA acknowledged that the gap between wholesale and retail prices had been widening in recent weeks
RAC fuel spokesman Simon Williams said: “Regardless of the reasons for wholesale prices being what they are we continue to believe there is clear evidence, not least in the last week, that major retailers are incredibly slow to pass on falling wholesale costs, yet quick to pass on rising ones. The idea of allowing drivers to more easily pump prices near them may also prove beneficial.
“The question drivers may have, however, is how long the review will take and – crucially – when they might see a change to what they pay every time they fill up. As each day goes by and the cost-of-living crisis is felt ever more keenly, the need for retailers – especially the largest ones – to reflect wholesale prices fairly becomes ever more urgent.
“We urge the Government to ensure it’s in a position to scrutinise the relationship between wholesale and retail prices. And where issues are found, it must be able to take action that quickly leads to fairer prices.”