Increased supermarket fuel margins led to drivers paying an extra 6 pence per litre last year, according to a long-awaited report from the UK’s competitions watchdog.

From 2019-22, average annual supermarket margins increased by 6 pence per litre (ppl)

The Competition and Markets Authority said its in-depth study into the road fuel market had found a weakening of competition in retail since 2019 – and it’s called for major changes including live fuel data to encourage fairer UK petrol and diesel prices.

The CMA found there was no evidence to suggest that there has been cartel behaviour taking place and it has no plans to open an enforcement case.

But its analysis revealed that from 2019-22, average annual supermarket margins increased by 6 pence per litre (ppl) – and this will have had a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.

While supermarkets have historically been the cheapest places to buy fuel – typically led by Asda – the CMA uncovered that in 2022, Asda and Morrisons each made the decision to target higher margins. Asda more than tripled its fuel margin target in 2023 compared to 2019, while Morrisons doubled its margin target in the same period.

Other retailers, including Sainsbury’s and Tesco, then raised their prices in line with these changes.

Diesel prices have been particularly hard hit and have been slow to drop in 2023. The CMA said this was partially down to Asda ‘feathering’ (reducing pump prices more slowly as wholesale prices fell) its prices and other firms not responding competitively to that.

As a result, the watchdog estimates that drivers have paid 13ppl more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.

The CMA data also reveals that motorway service stations are charging around 20ppl more for petrol and 15ppl more for diesel compared to other fuel stations. The price premium at motorway service stations has grown in real terms since 2012, and price variation on motorways is low, due to limited competition between service stations.

It’s now fined Asda £60,000 for failing to provide information when required.

But the CMA has also recommended major changes, including a new fuel finder scheme that would give drivers access to live, station-by-station fuel prices on their phones or satnavs – this would help revitalise competition in the sector and would help tackle high motorway prices by giving drivers an easy way to see where they can find cheaper fuel in the area.

The scheme would be made possible by new compulsory open data requirements and backed by a new ‘fuel monitor’ oversight body – something that many in the motoring sector have been long been calling for.

Sarah Cardell, chief executive of the CMA, said: “Competition at the pump is not working as well as it should be and something needs to change swiftly to address this.

“We need to reignite competition among fuel retailers and that means two things. It needs to be easier for drivers to compare up to date prices so retailers have to compete harder for their business. This is why we are recommending the UK government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time. This would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on satnavs and map apps.

“Given the importance of this market to millions of people across the UK this needs to be backed by a new fuel monitor function that will hold the industry to account. As we transition to net zero, the case for ongoing monitoring of this critical market will grow even stronger, so we stand ready to work with the UK government to implement these proposals as quickly as possible.”

‘A landmark day for UK fuel prices’

The RAC – which has long been highlighting the supermarkets’ “excessive” fuel margins – said the CMA’s report marked a landmark day when it came to fuel prices in the UK.

Fuel spokesman Simon Williams said: “The fact that drivers appear to have lost out to the tune of nearly £1bn as a result of increased retailer margins on fuel is nothing short of astounding in a cost-of-living crisis and confirms what we’ve been saying for many years that supermarkets haven’t been treating drivers fairly at the pumps.”

He added that the focus for the Government should be on action now – following up on both of the CMA’s recommendations, in particular the fuel monitor function.

“While forcing retailers to publish pump prices is a positive step for drivers, what’s of far more significance is the creation of a fuel monitor function within government which, we very much hope, actively monitors wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops. Without this, we fear drivers will continue to get a raw deal.

“Data we shared with the CMA shows there have been several instances of ‘rocket and feather pricing’ when the cost of wholesale petrol and diesel fell but it took an inordinate amount of time for supermarket pump prices to reflect this. And on several occasions, they didn’t ever fully cut pump prices to reflect just how far the wholesale market had dropped.”

Williams back this up by explaining that drivers are still having to pay more for diesel than unleaded at the pumps despite diesel having been cheaper on the wholesale market for more than three months.

He also urged the Government again to look at Northern Ireland as a good example of a competitive fuel market where retailers more closely reflect movements on the wholesale market.

“While drivers can research the best price in their area via a useful online fuel checker, the main reason for lower prices is a greater number of forecourts there per driver and the fact that the big four supermarkets don’t have the same hold on fuel retailing as they do on this side of the Irish Sea. The new fuel price monitor should look at price behaviour there to see if there are any lessons to be learned for the rest of the UK.”

The CMA’s final report on the Road Fuel Market Study is available here.