Darren Briggs was queueing to pay at his local Shell garage in Pembrokeshire when his blood began to boil. An irate holidaymaker was accusing the retailer of ripping him off on the price of petrol, which was apparently 15p cheaper at a Tesco near home in Birmingham.
Briggs, who owns the petrol station operator Ascona, couldn’t help but step in. “I explained to him that there are varying time lags on the pricing of fuel depending on different retailers’ contracts. It was a lightbulb moment for him,” says Briggs.
The eye-watering prices at Britain’s pumps will come under scrutiny this week as the Competition and Markets Authority (CMA) delivers the results of a “short and focused” review into the market on Thursday.
The chancellor, Rishi Sunak, announced a 5p-a-litre cut in fuel duty in March’s spring statement but, with petrol and diesel at record highs, the business secretary, Kwasi Kwarteng, asked the CMA last month to investigate whether the cut had been passed on, amid accusations of profiteering. UK petrol prices are just above 191p a litre on average, with diesel at 199p.
Gordon Balmer of the Petrol Retailers Association says: “All retailers passed on the duty cut: however, wholesale costs increased and overwhelmed the cut. It takes several weeks to pass on – by the time old stocks deplete, wholesale prices continue to rise.”
Retailers argue they are only making a few pence a litre in profit, that oil refineries have increased their own margins, that moving away from Russian oil has created challenges, and that they have taken a hit from the weakened pound.
Briggs’s Ascona runs 62 petrol stations under the Texaco, Jet, BP, Esso and Shell brands. He says he has to make 9p on a litre to be profitable and that the industry is facing a squeeze from rising labour and electricity costs, while less fuel is being bought as the pandemic has reduced travel.
Consumers are also driving less to save money, and “bilking” – driving off without paying – has increased by 61% this year. Staff are also increasingly facing abuse over prices.
Briggs says a petrol station costs £20,000-£30,000 a month to run and that he is desperate not to push prices above £2 a litre.
Balmer admits it’s a complex industry for officials to come to cold. For example, regulators will need to ensure they understand the differences between “CoCo” and “com-op” sites. At “company-owned company-operated” stores, the oil groups can alter the price regularly and manage the employees and station staff. At “commission operator” sites, the oil company will typically set the price at midnight for the following day, with another company running the shop.
In terms of brands, the supermarkets and oil giants fight it out for market share.
BP has the largest number of stores, at 1,224, just ahead of Esso and Shell, but grocery behemoth Tesco sells the most fuel, according to Forecourt Trader magazine. Its 514 stores grab nearly 16% of the market, as they are in busy locations and often tempt in shoppers with cheaper fuel. BP and Shell both hold 14%, just ahead of Esso, Sainsbury’s, Morrisons and Asda. Independents make up 5,372 of the UK’s 8,380 forecourts.
Industry watchers say the supermarkets – known for using cheap fuel to tempt in shoppers – have eased off in the competition over price.
Sunak’s 5p cut appears more miserly than in other countries. In Germany, fuel duty was cut by 25p a litre, drivers in the Netherlands, Ireland and Spain received a 17p reduction, and France cut 14p. Balmer wants a further cut to fuel duty or a cut to VAT.
Industry sources say the CMA has asked them when and how the 5p reduction has been passed on, how pump prices are set and what has happened in the market since the cut. If the regulator concludes there are issues with how the sector is functioning, a deeper investigation could well follow.