The Competition and Markets Authority will probe fuel prices and the role of Supermarkets in a study it began last year.
While the evidence shows that the majority of fuel price increases are due to global factors, such as the Russian invasion of Ukraine, indications are that higher pump prices cannot be attributed solely to factors outside the control of the retailer, the CMA said in a statement.
Based on evidence gathered as part of the Road Fuel market study, the higher prices drivers are paying at the pumps appear in part to reflect some weakening of competition in the road fuel retail market.
RAC fuel spokesman Simon Williams said, “We are very pleased to hear that the Competition and Markets Authority has confirmed what we have been saying for a long time about the biggest retailers taking more margin per litre on fuel than they have in the past.
“Currently, the average price of diesel is more than 20p a litre overpriced simply because they refuse to cut their prices. The wholesale price of diesel is actually 4p lower than petrol, yet across the country it is being sold for 9p a litre more – 154.31p compared to 144.95p for unleaded.
“Something badly needs to change to give drivers who depend on their vehicles every day a fair deal at the pumps. We hope even better news will be forthcoming later this summer.”
Evidence gathered by the CMA indicates that fuel margins have increased across the retail market, but in particular for supermarkets, over the past 4 years. As a result of these increasing margins, average 2022 supermarket pump prices appear to be around 5 pence per litre more expensive than they would have been had their average percentage margins remained at 2019 levels.
Although supermarkets still tend to be the cheapest retail suppliers of fuel, evidence from internal documents indicates that at least one supermarket has significantly increased its internal forward-looking margin targets over this period. Other supermarkets have recognised this change in approach and may have adjusted their pricing behaviour accordingly.
The CMA is also concerned that it may be seeing evidence of weaker competition in diesel, as compared with petrol, since the beginning of 2023. While some degree of variation in diesel retail margin is to be expected given the high levels of volatility in diesel wholesale prices, the high margins in 2023 appear to have gone on longer than would be expected. The CMA needs to understand whether weaker competition is part of the explanation for this.
Whilst the level of engagement with the study has varied across supermarkets, we are not satisfied that they have all been sufficiently forthcoming with the evidence they have provided.
In particular, important information has only been received late in the day and after several rounds of information gathering. Given the concerns we have about a market of such importance to millions of drivers it is vital we get to the bottom of what is going on.
The CMA will now conduct formal interviews with the supermarkets’ senior management in order to get to the heart of the issues. We will issue our final report no later than 7 July 2023, covering the full range of issues we have considered in this market and setting out any further action that we think is needed.
