Yahoo Finance Petrol and diesel prices at pumps in the UK not falling with wholesale cost
Petrol and diesel prices for customers are falling at a slower rate than fuel wholesale prices, claims the RAC after new findings come to light.
On Tuesday, the Competition and Markets Authority, CMA, published the Road Fuel Market Study, an analysis of fuel prices in the UK.
The analysis reported 2022 as the most volatile year for fuel prices on record and that changes in retail pricing, including the different rates of price change between wholesale and retail prices, require further investigation.
The CMA report stated: "2022 is the most volatile year for fuel prices since reliable records began. Prices rose by around 50p a litre from January to July, the largest leap in fuel prices ever recorded in one year, before falling by 31p for petrol and 14p for diesel since."
Read more: FTSE pushes higher as EU sanctions on Russian oil come into force
The CMA study also concluded that annual retailer fuel margins are increasing, but that the causes for this are not yet clear.
The CMA said: "Between 2017 and 2021, the difference between the price retailers paid for fuel and the pump price, the “fuel margin”, rose by the equivalent of 2-3p a litre on diesel and 3-4p a litre on petrol.
"This could be accounted for by other cost rises for retailers or weaker competition on fuel. We will investigate further."
Read more: What is fractional ownership? And is it the new buy to let?
The RAC gave its reaction to the CMA's Road Fuel Market Study, particularly focussing on the differing rates of change between retail and wholesale prices.
RAC fuel spokesman Simon Williams said: “While it’s encouraging the CMA has found evidence of ‘rocket and feather’ pricing taking place this year, we believe there was clear evidence of it happening this time last year and in 2018 and 2019.
"Volatility has unquestionably been an issue in fuel pricing since Russia invaded Ukraine but when wholesale prices trend down for weeks at a time drivers should see pump prices do the same at a similar rate, unfortunately, our data shows that this is not often the case.
"What’s happening now, as it was last December, is a massive downward shift in the price of wholesale fuel with a slow dropping of forecourt prices.
"Consequently, drivers are set for a more expensive time on the roads this Christmas than it should be."
The RAC added that from their data the wholesale price of petrol has fallen from 130p a litre at the beginning of October to 109p yesterday, this being a drop of 21p.
The British insurance company contrasted this fall with the average price of unleaded at the end of October, which peaked 166.88p, but according to their data the price of unleaded at the pump only fell 8p to 158.91p.
The RAC added: "Even accounting for the accepted lag for cheaper wholesale prices to filter through to forecourts, this is too slow, particularly as the biggest retailers buy new stock so often.
Read more: UK in recession until end of 2023, CBI warns
“The situation with diesel is even worse as it has plummeted by 33p over the same period but the average retail price has only come down by 8.4p from 191.12p to 182.71p yesterday.
“We strongly urge the biggest retailers to lower their prices. Unfortunately, we fear they are holding out, hoping for a rise in the price of oil later this month."
The CMA claimed that their analysis revealed there was no evidence of a so-called “rocket and feather” pricing in the years before 2022.
However, the consumer watchdog stated it saw some evidence of rocket and feather behaviour emerging this year, particularly for diesel and that they will investigate further.
The CMA report added: "Refining margins have risen and continue to be very volatile.
Read more: Do we need to get over our fixation with fixed rate mortgages?
"This leads to higher prices at the pump, but we see no evidence that this is down to competition problems in the UK.
"Refining margins are largely dictated by global supply and demand and over the medium term, UK refiners have not earned profits at levels that would give us cause for concern."
Interim Chief Executive, Sarah Cardell said: “It has been a terrible year for drivers, with filling up a vehicle now a moment of dread for many. The disruption of imports from Russia means that diesel drivers, in particular, are paying a substantial premium because of the invasion of Ukraine. A weaker pound is contributing to higher prices across the board too.
“There are no easy answers to this. The question for the CMA is whether a lack of effective competition within the UK is making things worse. Although it is only a small proportion of the overall price, the increase in margins for many fuel retailers over the last few years is something we need to investigate further. The key thing we need to establish next is whether this development is down to competition problems or not.”
The CMA's Road Fuel Market Study was launched in July. The study used company-level financial data, from retailers, refiners and wholesalers in its compilation. The CMA added that it has conducted in-depth analysis of fuel prices over the last five years.
Watch: Cost of living: First easing of grocery inflation for 21 months but Christmas dinner costs surge 9%
