CMA report findings signify ‘landmark day’ for fuel prices in the UK

According to the CMA’s findings any potential scheme would be made possible by new compulsory open data requirements and backed by a new ‘fuel monitor’ oversight body.

Following the research by the CMA, they announced that the UK had been suffering from a weakening of competition in fuel retail since 2019.

At present, retailers only provide information on prices at the petrol stations themselves. This makes it hard for drivers to compare prices and weakens competition.

Any fuel finder open data scheme that could be introduced would need statutory backing through legislation to ensure fuel retailers provide up-to-date pricing and make that available to drivers in an open and accessible format that can be easily used by third party apps, satnavs, or a fuel finder app.

Should this get approved by the Government, the fuel finder app would monitor prices and margins on an ongoing basis and recommend further action if competition continues to weaken in the market.

In the year leading up to the announcement, the CMA had been investigating the road fuel market in detail and reached the conclusion that competition is not working, and greater transparency would be needed to improve consumer confidence and bring down the price of fuel.

Further details within the report revealed that from 2019 to 2022, average annual supermarket margins have increased by 6 pence per litre, and there was also increased margins on diesel across all retailers have cost drivers an extra 13 pence per litre from January 2023 to the end of May 2023.

The report also found that motorway service stations are currently charging around 20 pence per litre more for petrol and 15 pence more for diesel compared to other fuel stations around the UK.

Supermarkets were found to generally be the cheapest places to buy fuel, with Asda typically the cheapest.

However, the CMA’s report highlighted that in 2022, both Asda and Morrisons each made the decision to target higher margins.

In fact, Asda’s fuel margin target in 2023 was more than three times what it had been for 2019 – and Morrisons doubled their margin target over the same time period.

Other retailers did not respond in the way you would expect in a competitive market and instead raised their prices in line with these changes.

The summary of the report stated that ‘taken together, this indicates that competition has weakened and reinforces the need for action’.

Furthermore, diesel prices have been slow to drop in 2023.

Findings from the report found that this was partially due to Asda ‘feathering’ (reducing pump prices more slowly as wholesale prices fell) its prices and other firms not responding competitively to that.

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Sarah Cardell, Chief Executive of the CMA, said: “Competition at the pump is not working as well as it should be, and something needs to change swiftly to address this.

“Drivers buying fuel at supermarkets in 2022 have paid around 6 pence per litre more than they would have done otherwise, due to the four major supermarkets increasing their margins. This will have had a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.

“We need to reignite competition among fuel retailers and that means two things. It needs to be easier for drivers to compare up to date prices, so retailers have to compete harder for their business. This is why we are recommending the UK government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time.

“This would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on satnavs and map apps.”

Following the release of the report, RAC fuel spokesman Simon Williams said: “This is a landmark day when it comes to fuel prices in the UK. The fact that drivers appear to have lost out to the tune of nearly £1bn as a result of increased retailer margins on fuel is nothing short of astounding in a cost-of-living crisis and confirms what we’ve been saying for many years that supermarkets haven’t been treating drivers fairly at the pumps.

“It’s all about action now and we're extremely pleased to see the Government has agreed to follow through with both of the CMA’s recommendations.

“While forcing retailers to publish pump prices is a positive step for drivers, what’s of far more significance is the creation of a fuel monitor function within government which, we very much hope, actively monitors wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops. Without this, we fear drivers will continue to get a raw deal.

“Data we shared with the CMA shows there have been several instances of ‘rocket and feather pricing’ when the cost of wholesale petrol and diesel fell but it took an inordinate amount of time for supermarket pump prices to reflect this. And on several occasions, they didn’t ever fully cut pump prices to reflect just how far the wholesale market had dropped.

“This is even the case today with diesel prices as for more than three months the cost of buying diesel on the wholesale market has been less than petrol, yet it remains the case that drivers are still having to pay more for diesel than unleaded at the pumps.

“At one point the average margin charged on diesel was 25p a litre which is more than three times the long-term margin of 7p. This shouldn’t be allowed to happen, particularly when the Treasury has reduced duty by 5p a litre to help households struggling with the cost-of-living crisis.

“Interestingly, Northern Ireland is a good example of a competitive fuel market as retailers more closely reflect movements on the wholesale market. While drivers can research the best price in their area via a useful online fuel checker, the main reason for lower prices is a greater number of forecourts there per driver and the fact that the big four supermarkets don’t have the same hold on fuel retailing as they do on this side of the Irish Sea. The new fuel price monitor should look at price behaviour there to see if there are any lessons to be learned for the rest of the UK.

“Those wanting to ensure they always get the best price fuel possible should download the myRAC Fuel Finder app which is available free of charge to every driver.”

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