Drivers have been hit by so-called ‘rocket and feather’ pricing on road fuel this year, the UK’s competition watchdog has reported.

Drivers are facing the most volatile year for fuel prices on record, according to the CMA’s emerging evidence

The Competition and Markets Authority (CMA) said that while there were no signs of such behaviour by retailers in the years before 2022, it’s found evidence of a change this year – in particular for diesel.

It’s possibly the result of the extreme volatility of prices and supply in 2022 – and the CMA has said it will investigate further.

This is just one of the findings from the CMA’s emerging analysis from its Road Fuel Market Study – which also highlights that drivers are facing the most volatile year for fuel prices on record. 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.

The CMA also found that the gap between diesel and petrol prices has become larger than ever reliably recorded. Diesel now costs 24p more per litre than petrol. The watchdog said this was largely due to Western Europe’s reliance on imports of diesel, but not petrol, from Russia.

Other findings include:

• Prices vary widely between local areas. CMA analysis found that prices are likely to be higher at petrol stations where there are few (or no) competitors nearby – and particularly where there is no local supermarket petrol station. It will investigate this further.
• Annual retailer fuel margins are increasing, but the causes are not yet clear. 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. Again, the CMA will investigate further.
• Refining margins have risen and continue to be very volatile. This has led to higher prices at the pump, but the CMA says it sees no evidence that this is down to competition problems in the UK and adds that such margins are largely dictated by global supply and demand. Over the medium term, it says profits by UK refiners do not give cause for concern.

The emerging evidence, which the CMA is now inviting views and comments on – follows an urgent review requested by the Government in June to look, in particular, at whether the cut in fuel duty, announced in March 2022, had been passed on to consumers. The review, which covered just one year of data, unearthed some fuel pricing concerns and a lack of transparency and the watchdog decided to launch a full Market Study. This uses five years of data and allows the CMA to use compulsory information-gathering powers to probe the entire market.

Commenting on the emerging evidence, CMA 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.”

Rocket and feather pricing not just short-term problem, says RAC

While the RAC has welcomed the CMA’s findings and said it’s encouraging the competition regulator has found evidence of ‘rocket and feather’ pricing this year, it believes there is clear evidence of it in 2021, and back in 2018 and 2019.

Warning about high prices for drivers this Christmas, RAC fuel spokesman Simon Williams added: “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.”

RAC data shows the wholesale price of petrol has fallen from 130p a litre at the beginning of October to 109p yesterday (5 December 2022), which is a drop of 21p.

However, the average price of unleaded at the end of October peaked 166.88p but has to date only fallen 8p to 158.91p.

“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,” Williams remarked.

And the RAC says 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.”

Last week saw the RAC accuse the UK’s big four supermarkets of overcharging drivers on fuel due to excessive margins. Speaking on Saturday (3 December), Williams said: “It’s bordering on a scandal that drivers are being overcharged so much because the big four supermarkets, which dominate UK fuel retailing, are flatly refusing to reduce their prices by bigger amounts. Their prices are dropping like a feather when they should be falling like a stone.”

In separate news, the Petrol Retailers Association (PRA), which represents independent fuel retailers, has warned of an “alarming increase” in the number of motorists filling up their cars without paying.

Gordon Balmer, executive director of the PRA, said in a letter to Chris Philp, the new Minister of State for Crime, Policing and Fire, that the association’s members were reporting a marked increase in this type of crime, as a result of the cost-of-living crisis.

The industry body said such incidents cost the industry in excess of £40m and accused local police forces of a “lacklustre response”, adding that some had openly stated they would not pursue drive-offs under a certain value.

“The PRA will continue pushing for a clamp-down on forecourt crime on behalf of our members,” Balmer stated.