Petrol and Diesel Profit Margins Remain High, Warns Watchdog
The UK’s competition watchdog, the Competition and Markets Authority (CMA), has revealed that profit margins on petrol and diesel are still at “persistently high levels,” raising concerns that drivers are paying more than necessary at the pumps, despite a recent drop in fuel prices.
Key Findings from the CMA Report
– Weak Competition: The CMA criticized the competition among fuel retailers, indicating it remains inadequate.
– Retailers’ Claims Challenged: The CMA challenged the assertion that higher operating costs are the reason for elevated profit margins.
– Current Fuel Prices: As of last week, petrol averaged 136.8p per litre, while diesel was at 146.1p per litre.
Analysis of Fuel Price Trends
– Significant Price Drops: Fuel prices have notably decreased since the CMA’s last analysis in 2023, attributed mainly to lower oil costs.
– High Profit Margins: Despite falling prices, the CMA noted that profit margins are historically high for both supermarket and independent retailers.
– Inconsistencies in Retailer Claims: The report suggested that if operating costs had genuinely increased, this should correlate with a decrease in profit margins.
Upcoming Fuel Finder Scheme
The CMA is collaborating with the government to introduce a fuel finder scheme that will allow drivers to compare real-time fuel prices easily.
– Integration with Technology: The scheme will be accessible through apps and navigation systems, enabling drivers to view prices and foster competition among fuel retailers.
– Regulatory Measures: Retailers will need to report price changes within 30 minutes, and non-compliance could result in fines.
Responses from Industry Stakeholders
– Petrol Retailers Association (PRA): While the PRA acknowledged the CMA’s findings, they asserted that steep rises in labour, taxation, energy, and crime contribute to rising operating costs, which are not reflected in margin comparisons.
– Gordon Balmer, executive director of the PRA, emphasized that while pump prices are declining from peak levels in 2022 and 2023, cost pressures remain substantial for retailers.
– RAC and AA Statements: Both organizations have voiced that drivers are still being overcharged.
– The AA noted that since November, the wholesale price of petrol has dropped by over 7p per litre, yet retail prices have only decreased by a mere two-thirds of a penny.
– Simon Williams, head of policy at the RAC, pointed out that drivers should not be surprised by the ongoing high prices, especially amid significant price differences in various regions.
Conclusion
With fuel profit margins at persistently high levels, the CMA’s findings highlight the urgent need for increased competition in the fuel market. The forthcoming fuel finder scheme aims to enhance transparency, enabling drivers to make informed choices and potentially reducing the financial strain of high pump prices. It is imperative for both regulators and retailers to address these concerns proactively to ensure fair pricing for all consumers.