The UK’s competition watchdog is to investigate supermarkets on fuel pricing as evidence suggests an increase in margins has led to higher prices at the pumps.

The findings indicate some weakening of competition in supermarket fuel prices that has helped push up pump prices

Providing an update on the Road Fuel market study started last year, the Competition and Markets Authority (CMA) said warned that higher pump prices weren’t solely related to factors outside the control of the retailers, such as the Russian invasion of Ukraine – and added that its evidence indicated some weakening of competition in the road fuel retail market that had in part resulted in increased pump prices.

While fuel margins have increased across the retail market, they’ve particularly gone up for supermarkets in the last four years.

Average 2022 supermarket pump prices appear to be around 5p a litre more expensive than they would have been, had their average percentage margins remained at 2019 levels.

The CMA added that its findings indicated that at least one supermarket had significantly increased its internal forward-looking margin targets over this period – which has been picked up by other supermarkets and possibly led them to adjust their pricing behaviour accordingly.

The findings also suggest evidence of weaker competition in diesel, compared with petrol, since the beginning of 2023 – and that the high margins in 2023 appear to have gone on longer than would be expected under the current levels of volatility in diesel wholesale prices.

The watchdog now intends to ramp up its investigation as it warns that the supermarkets have not all “been sufficiently forthcoming with the evidence they have provided”. It will now conduct formal interviews with the companies’ senior management “to get to the heart of the issues”.

A final report is due by 7 July 2023, setting out where any further action is needed.

The findings echo what the RAC has been saying for many months about supermarkets charging “unnecessarily high” fuel prices.

Fuel spokesman Simon Williams said: “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.”

The AA also welcomed the decision, which it said confirmed that drivers had been hit by “bloated pump prices since 2021”, impacting family and business finances.

AA president Edmund King said: “Since the pandemic, competition between forecourts has too often and in too many places been non-existent. The current diesel price scandal and the fiver-a-tank cost difference between neighbouring communities are just two examples.

“More recently, a handful of maverick small forecourts slashing prices, saying they can still stay commercially viable, has exposed the shame of the other retailers.”

The Petrol Retailers Association, which represents independent fuel retailers, highlighted that the CMA update had focused on supermarkets, and added that it had cooperated with all of the CMA’s requests for information.

Gordon Balmer, executive director, stated: “The market is very dynamic and independent forecourts are in many cases undercutting supermarkets on price. Our advice to motorists remains to shop around.”

Latest fuel data shows drop in petrol prices but above-average margins remain

Latest pump price information is now out from the RAC, coinciding with the CMA’s update.

The average price of petrol has fallen below 145p a litre for the first time in 18 months, according to the latest figures.

The price of a litre of unleaded dropped to 144.95p on Sunday 14 May – its lowest price since 3 November 2021.

Diesel also dipped below 155p a litre, hitting 154.31p on Sunday and reaching its lowest level since 28 February last year.

Petrol prices have now come down by 47p a litre (46.55p) since they peaked at 191.5p last summer (3 July 2022), saving drivers £25.60 every time they fill up (£105.32 to £79.72). Diesel, which reached an all-time high of 199.09p on 25 June, has fallen 45p (44.78p), saving drivers £24.62 a tank.

The RAC’s Simon Williams said the fall in prices was good but added that diesel drivers and fleets  should be paying 20p a litre less, as diesel’s wholesale price is now 4p lower than petrol’s.

“This is being demonstrated very powerfully by one independent retailer in Shropshire who is currently charging 131.9p – more than 22p below the UK average. We hope this finally embarrasses the country’s biggest retailers to cut their pump prices significantly.”

He added that if the supermarkets adopted fair fuel pricing approaches, diesel would actually be well under its long-standing 2012 high of 147.93p.

“With the delivered wholesale prices of both petrol and diesel at 110p and 105p respectively, drivers should be paying no more than 142p and 137p, and that’s factoring in an above-average 10p-a-litre retailer margin.”