Petrol stations are to be investigated for not having to pass on falling wholesale prices to drivers, amid suspicions that fuel retailers are using the Ukraine war as a cover to boost their profits.
The Competition and Markets Authority said it has witnessed “rocket and feather” fuel prices, where prices rise sharply, like a rocket, to accommodate higher oil prices and other costs , but then slowly fall like a feather as market prices drop. Under this arrangement, retailers keep the difference between wholesale prices and pump prices as costs are reduced.
“Between 2017 and 2021, the difference between the price retailers paid for fuel and the price at the pump (the ‘fuel margin’) increased by the equivalent of 2-3p per liter of diesel and 3 -4p per liter of petrol”, explained the CMA. Found.
The body said the increase could be the result of “extreme price and supply volatility in 2022”, but pledged to “investigate further”.
Brent crude hit highs of more than $125 a barrel in March in the wake of Russian President Vladimir Putin’s war and hit similar prices in June. Since then, prices have fallen, with oil’s most recent value nearing $80.
Petrol prices hit record highs of almost 200p a liter over the summer but have since fallen, recently below 160p a litre.
Diesel drivers have seen longer-lasting increases, the CMA said. The gap between the two fuels is the largest ever recorded, with a 24p premium for diesel.
Much of this is due to Western Europe’s dependence on Russian diesel imports, which have been disrupted by Moscow’s attack on Ukraine.
RAC fuel spokesman Simon Williams said: “While it is encouraging that the CMA has found evidence of ‘rocket and feather’ pricing taking place this year, we believe there was clear evidence that it happened this time last year and in 2018 and 2019.
“Volatility has certainly been an issue in fuel prices since Russia invaded Ukraine, but when wholesale prices tend to fall for weeks, drivers should see pump prices do the same at a similar rate.
“Unfortunately, our data shows that this does not happen often.”
The CMA also found evidence that areas with fewer petrol stations and therefore less competition had higher fuel prices, particularly in areas without supermarkets owned pumps.
Supermarkets tend to sell fuel at smaller margins than dedicated gas station chains to attract shoppers to their stores.
CMA Acting Chief Executive Sarah Cardell said: “It’s been a terrible year for drivers, filling up a vehicle is now a scary time for many.
“The disruption to imports from Russia means diesel drivers in particular are paying a substantial premium due to the invasion of Ukraine. A weaker pound is also contributing to higher prices overall.”
Higher energy costs have also contributed to higher gasoline and diesel prices at the pump as oil refining and distribution costs rise.