‘Major worry’: Fuel price differences in urban and rural areas are a ’cause for concern’
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The Competition and Markets Authority (CMA) released its report on fuel prices, citing several key factors which led to the higher prices. It stated that the main drivers of increased road fuel prices are the rising cost of crude oil and a growing gap between the crude oil price and the wholesale price of petrol and diesel.
This is known as the “refining spread”, which has tripled in the last year, growing from 10p to nearly 35p per litre.
Over the same period, the so-called “retailer spread” – the difference between the wholesale price and the price charged to motorists – fluctuated but remained about 10p per litre on average.
On the whole, the fuel duty cut appears to have been implemented, with the largest fuel retailers doing so immediately and others more gradually.
The report also found that there are significant differences in price between many rural and urban areas.
Currently, fuel prices are near their highest ever rate, with diesel close to £2 per litre, which has been described by most experts as a grim milestone”.
As a result of the report, the CMA announced it would launch a more in-depth market study, with this expected to be released in the autumn.
Jack Cousens, the AA’s head of roads policy, welcomed the CMA report, saying there was a need for further investigation.
He said: “Pump-price competition in the UK is broken. A month of major wholesale price falls without a penny coming off the average pump price of petrol is testament to that.
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“However, the AA argues that the problem is not the gap between the oil price and wholesale price feeding through to the forecourts but the length of time it takes for that wholesale price to be reflected at the pump.
“The fuel trade has no trouble in passing on rising costs to the customer but lags badly in passing on savings. It has been labelled ‘rocket and feather’ pricing, and it exists.”
Mr Cousens added that at the time of then-Chancellor Rishi Sunak’s 5p fuel duty cut, wholesale prices had been falling.
Despite this, it took weeks for the tax cut to be reflected in the UK price averages.
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Last week, after wholesale petrol since the Jubilee bank holiday fell 5p a litre by mid June and is now 10p lower, a new fuel duty cut has been talked about.
Mr Cousens continued, saying: “Pre-pandemic, UK fuel pricing had settled into a rhythm where significant wholesale price reductions would start to be passed on in a matter of days by ‘cost-cutter’ supermarkets.
“That would then trigger other supermarkets and fuel retailers to start bringing down theirs, or find themselves at a competitive disadvantage.
“That didn’t mean that oil company forecourts couldn’t cut their prices sooner. However, most of them just sat back waiting for the supermarkets to make the first move.
“That trigger appears to have gone, and now there is a need to find another way to re-invigorate pump-price competition.”
The AA welcomed the CMA’s suggestion of more pump price transparency immediately, which is something it has been calling for for years.
Sarah Cardell, CMA General Counsel, said the pump prices were a “major worry” for millions of drivers.
She added: “While there is no escaping the global pressures pushing up fuel prices, the growing gap between the oil price, and the wholesale price of petrol and diesel, is a cause for concern.
“We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it.
“On the whole the retail market does seem to be competitive, but there are some areas that warrant further investigation.
“These include finding out whether the disparities in price between urban and rural areas are justified.”
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