The Competition and Markets Authority (CMA) has confirmed it will carry out an urgent review of the fuel market alongside a longer-term investigation to explore whether the retail fuel market has adversely affected consumer interests.   

The AA welcomed the news of a fuel market review but said more urgent action was needed and called for an immediate 10p cut to fuel duty

The news was confirmed mid-morning today (13 June 2022) by Business Secretary Kwasi Kwarteng on the back of his request for a review amid new record fuel prices despite the 5ppl fuel duty cut implemented in March.

In his letter to the CMA on Saturday, Mr Kwarteng said the British public were “rightly frustrated” that the £5bn fuel duty cut announced in the Spring Statement did not seem to have been passed through to forecourt prices. He also noted concerns that prices in some towns remain higher than in similar nearby towns.  

The CMA has been asked to look at the health of competition in the market, geographic factors and any other action that the Government could take to strengthen competition or increase transparency.  

The AA welcomed the review but said more urgent action was needed and called for an immediate 10p cut to fuel duty. 

Jack Cousens, head of roads policy, commented: “That would help restore some balance ahead of the initial CMA findings due in early July. 

“Longer term, the CMA should consider extending the pump price transparency available in Northern Ireland to the rest of the UK. The Consumer Council’s Fuel Price Checker stimulates competition and has led to drivers there enjoying the lowest fuel prices in the UK.” 

Meanwhile the RAC said the CMA investigation should ensure that drivers pay a fairer price at the pumps in the future, but added that it’s also important to realise that motorists tend to lose out most when there are significant drops in the wholesale price which retailers don’t pass on.

RAC fuel spokesperson Simon Williams elaborated: “This was the case in December when there was a big drop in the price of oil which should have translated to lower forecourt prices. Instead retailers stood strong, only lowering their prices by a couple of pence a litre when there should have been a 10p a litre drop in the average price of petrol.

“In a rising market, such as we’re experiencing in now, it’s very different in that retailers are constantly having to put up their prices to reflect the fact their costs are increasing every time they buy new stock. Since Russia invaded Ukraine on 24 February the wholesale price of petrol has gone up by 28%. This is why the Government’s 5p March duty cut has had little effect, whether or not it’s been fully passed on by retailers, and why they need to go further now to help drivers.”

The Petrol Retailers Association said it “welcomed transparency regarding fuel pricing” and would co-operate with the CMA’s investigation. 

But it added that the briefings provided by Government spokespeople to the media indicated that Ministers do not understand how fuel prices are set – and added that the review would not only confirm that the 5ppl fuel duty cut has been passed on but that “competition between forecourts remains vigorous and that our members are operating on razor-thin margins”.

Gordon Balmer, executive director of the PRA, commented: “Petrol retailers have been unfairly scapegoated for rises in the wholesale price of fuel over which they have no control.

“If the Government wants to ease the burden of pump prices on motorists, they should cut fuel duty by a much more substantial margin, just as many other governments of European countries have done.”

The association had already said last month that retailers were passing on the 5p fuel duty cut but also pointed out that wholesale fuel prices had risen sharply since Spring Statement, countering the cut. It’s also said that a CMA investigation on the forecourt sector would “find competition drives down the price to the lowest possible levels”.  

The PRA has also highlighted that the Exchequer has benefited from substantially higher VAT receipts thanks to the increase in wholesale fuel prices since the Spring Statement. For every 10p that the price rises, the Chancellor claims back an extra 2p in VAT.  

Currently, following the 5p cut, duty stands at 52.95p per litre and the Government also adds 20% VAT on the price of fuel. According to latest data, the Government is now raking around £46 in tax from every full tank. 

New record pump prices and first-ever £105 fill-up for diesel   

Forecourt fuel prices hit further new records over the weekend, although the AA has said that the wholesale rise in petrol has ground to a halt, bringing hopes of some respite at the pumps by the end of the week.  

Latest AA data shows that petrol average pump prices reached a new record yesterday, with petrol rising to 185.04p a litre. Diesel fell back slightly on Sunday to 190.92p a litre, having reached a new record of 191.03p on Saturday.  

It means that in the last week, petrol has gone up by 7.16p while diesel has shot up 5.91p.  

And in the last year, petrol has risen by 54.51p while diesel has rocketed by 57.99p a litre. The cost of filling the typical 55-litre car tank is now £29.98 dearer than a year ago (£71.79 versus £101.77).  And the cost for an average diesel fill-up has now broken the £105 barrier.

However, the AA said that petrol price rises should be grinding to a halt, at least temporarily, by the end of the week after a fallback in the wholesale price of petrol heading to the forecourts.    

Luke Bosdet, the AA’s fuel price spokesman, added: “If they continue to go up substantially afterwards, we will be intrigued to hear what excuses the fuel trade has this time.”  

But he continued: “With petrol, however, this is an extremely volatile market and only time will tell whether the recent fall in costs is a brief pause or a longer-term reversal.   

“In particular, the price difference between neighbouring towns needs to shrink substantially in many areas, particularly with supermarkets of the same brand.”