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Fuel Prices: Cost At Pump 'Is Fair'

(c) Sky News 2013

The road fuel sector is "working well" according to a report into the UK's £47bn market by the Office of Fair Trading (OFT).

The regulator said high prices at the pumps were a result of increasing crude oil prices and taxes - not a lack of competition.

In the 10 years between 2003 and 2012, petrol prices increased from 76p per litre (ppl) to 136ppl, and diesel rose from 78ppl to 142ppl.

But the OFT stressed that over this period, taxes and duties rose by 24ppl and crude oil went up 33ppl.

It said had not identified any evidence of anti-competitive behaviour at a national level - where competition was strong - but admitted there could be some issues at a local level.

The regulator also found "very limited evidence" that oil and gas companies do not pass on lower crude oil prices to retailers and motorists as quickly as they could.

It comes amid concerns that pump prices rise quickly when the wholesale price of crude oil goes up but fall more slowly when it drops.

The chief executive of the OFT, Clive Maxwell, said: "We recognise that there has been widespread mistrust in how this market is operating.

"However, our analysis suggests that competition is working well, and rises in pump prices over the past decade or so have largely been down to increases in tax and the cost of crude oil."

The report did find that fuel is often significantly more expensive at motorway service stations - in August, prices were on average 7.5ppl more for petrol and diesel was 8.3ppl higher.

As a result, the regulator called for the Department for Transport to consider introducing new road signs displaying prices to drivers before they pull into a service station.

The OFT said the growing influence of supermarkets had been a key feature of the sector over the past decade.

The 'big four' - Tesco (Other OTC: TSCDY - news) , Asda, Sainsbury (LSE: SBRY.L - news) 's and Morrisons - have increased their share of road fuel sold in the UK from 29% in 2004 to 39% in 2012.

The report recognised that many independent dealers had found it difficult to compete, with the total number of forecourts falling from 10,867 in 2004 to 8,677 in 2012.

But the OFT also said that - pre-tax - the UK has some of the cheapest road fuel prices in Europe.

As a result of its findings, the regulator will not launch a full investigation into the road fuel market - despite calls for one from campaigners.

Quentin Wilson, from campaign group FairFuelUK, said UK consumers would be disappointed by the OFT's findings.

"Every motorist and business in Britain instinctively knows that ‘something's not right’," he said.

"The Americans and the Germans are holding inquiries – why aren't we?

"The OFT appears to have failed to address the key issues of why diesel is more expensive than unleaded in the UK when this is not the case in Europe, why falls in the oil price take so long to be reflected at the pump and why there are such variations in price."

But oil analyst Malcolm Graham-Wood from VSA Capital welcomed the report.

"This totally concurs with our own view that there is no collaboration and that retail petrol prices in the UK fairly reflect the price of crude oil ... for better or worse," he said.

"Groups like FairFuelUK seem to think that just because petrol prices vary from different areas that this is due to collaboration and price fixing which is patently not the case."

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