RAC raises issue of high retailer fuel margins with Energy Secretary

The RAC has this week written to Energy Secretary Claire Coutinho to draw her attention to the fact that retailer margins on fuel are far higher than they should be and that drivers are still losing out at the pumps.

Despite the Government getting retailers to make fuel prices publicly available on a daily basis, and the Competition and Markets Authority (CMA) continuing to scrutinise prices following its report last year which concluded major retailers had overcharged by £900m in 2022, average margins on fuel remain ‘unreasonably’ high.

RAC Fuel Watchanalysis reveals the margin on diesel has been above 15p a litre since 22 April and last week increased to above 18p. The margin on petrol is now nearly 12p a litre and has averaged 10p so far this year. The long-term average for both fuels is just 8p.

Margins have risen even more in the last week on the back of the cost of oil reducing significantly from around $90 to the $83 mark, which has brought wholesale fuel prices down.

The average price of petrol stands at 150p a litre while diesel is at 157p. If retailers were to be fairer on drivers, the RAC believes both fuels should be on sale for around 145p, given they have cost almost the same on the wholesale market for more than two weeks.

The Government is endeavouring to tackle high retailer margins by trying to increase competition with its proposed mandatory Pump Watch fuel price transparency scheme and the introduction of a price monitoring body. Ahead of that, it is currently operating a voluntary scheme with 14 of the biggest retailers providing prices for all their sites on a daily basis. The RAC is supportive of the scheme but has told the Secretary of State that it believes a price monitoring body with teeth is key to increasing competition and holding retailers to account.

RAC fuel spokesman Simon Williams said: “We feel the current margins being charged by larger retailers in particular are extremely unfair on drivers struggling to get by in the cost-of-living crisis. The big four supermarket retailers, which dominate fuel sales, are once again flatly refusing to cut their prices in the wake of much lower wholesale costs. If they were being fair on drivers, they should already have shaved at least 5p off their current petrol average of 147p and 8p off diesel which averages 154p at a supermarket forecourt.

“Our data shows the supermarkets are taking about 11p a litre on petrol and 16p on diesel compared to 3p and 8p in 2019.

“We realise that supermarkets, along with all businesses, have been affected by inflation, but these increases seem blatantly unfair. And, of course, without them cutting their prices, there is little incentive for other retailers to follow suit.

“Having tracked fuel prices against consumer inflation, it’s easy to see the link between the two. We therefore have a strange situation where unreasonably big fuel margins are making inflation higher than it should be.

“It’s very concerning to see fuel margins at such high levels, particularly as this is happening under the close eye of the CMA and while retailers are voluntarily sharing their forecourt prices with the intention of increasing competition.

“If the work of Department for Energy Security and Net Zero and the CMA has had any effect to date on improving fuel price transparency, we ought to see prices at the pumps reduce significantly in the next week due to a sustained drop in the cost of oil. Sadly, we fear retailers are likely to need a little more encouragement before this happens.

“The RAC believes the situation will only be improved in the long term if the CMA as the price monitoring body is able to take meaningful action against retailers whose margins are deemed not to be mirroring significant reductions in the cost of wholesale fuel.”