According to the UK’s competition authority, one of the key reasons for the rise in petrol costs is expanding oil refining margins.
After fuel had been processed by oil refineries, the Competition and Markets Authority (CMA) claimed to have uncovered a substantial increase in prices.
According to the UK’s competition authority, one of the key reasons for the rise in petrol costs is expanding oil refining margins.
After fuel had been processed by oil refineries, the Competition and Markets Authority (CMA) claimed to have uncovered a substantial increase in prices.
The government’s 5p fuel duty decrease ‘on the whole looks to have been executed,’ according to the urgent assessment conducted by business secretary Kwasi Kwarteng last month when fuel costs drew dangerously close to staggering £2 per litre.
It was discovered that in the days following the reduction in fuel duty, prices at supermarket gas stations were reduced by about 5p.
However, those at independently owned and operated oil companies decreased less, according to CMA.
According to the watchdog, fuel costs were reduced by about 3.5p at facilities run by oil companies and by about 2.1p at independently run sites.
Nevertheless, the CMA acknowledged that the Government’s 5p tax cut was imposed at a time when costs and crude oil prices were both rising.
Supermarkets, which account for roughly half of all gasoline sales, would have faced a cost as a result of lowering prices by 5p, while other retailers effectively passed through the tax break while not lowering prices to the full amount, according to the CMA.
According to the report, “on the whole, it appears that the fuel duty drop has been implemented, with the biggest fuel merchants doing so immediately and others more gradually.”
Immediately after the duty reduction, supermarkets—which account for 44% of all petrol sales—lowered their prices by just over 5p per litre.
They most certainly paid a price for doing so for the reasons mentioned above.
Other types of retailers likewise reduced their prices in the days after the duty reduction.
These price cuts totaled less than 5p: roughly 3.5p for sites run by oil companies and 2.1p for sites run independently.
The tariff cut prevented retail prices from rising during a time when they could have otherwise been anticipated to do so.
According to the report, fuel costs increased by about 60p for gasoline and 64p for diesel during the previous 12 months.
According to statistics from Experian, the average cost of a litre of gasoline on UK forecourts on Wednesday was 191.3p, while the cost of a litre of diesel was 198.8p.
The antitrust watchdog claims that one of the primary factors driving up oil refining margins is the rise in fuel prices.
In the last year, the price difference between crude oil when it enters refineries and the wholesale price when it leaves as gasoline or diesel has more than quadrupled, from 10p per litre to around 35p per litre, according to the analysis.
It stated that at the same time period, retailer margins “remained about 10p per litre on average.”
The CMA also blamed rising crude oil costs for record fuel prices.
The CMA stated that many rural and urban locations have “substantial disparities” in pump costs.
Additionally, it outlined how an open data program may make it simpler for customers to compare costs at nearby forecourts.
The regulator has started a market analysis that will look at the industry “in more detail.”
“The recent increases in pump prices are a big concern for millions of drivers,” CMA general counsel Sarah Cardell said.
While it is impossible to escape the global influences driving up fuel prices, the widening disparity between the price of crude and the wholesale cost of gasoline and diesel is worrying.
We must now determine whether there are valid explanations for this and, if not, what can be done to remedy it.
Although the retail sector appears to be competitive overall, there are several areas that demand more research.
The watchdog, according to her, “won’t hesitate to take action” if it discovers proof of “collusion or comparable crimes” and will “use our formal legal authorities” to probe pump prices.
“We are particularly glad to see that the CMA admits the disparity between wholesale and retail pricing has been expanding in recent weeks,” said Simon Williams, a spokesman for RAC Fuels.
Whatever the causes for the current state of wholesale prices, we still feel there is ample proof—including over the past week—that major retailers are extraordinarily sluggish to pass on declining wholesale costs and quick to pass on rising ones.
Allowing drivers to more readily access gas stations nearby may also be advantageous.
Drivers may wonder how long the evaluation will take and, more importantly, when they might see a change in the price they pay each time they fill up.
The AA’s head of roads policy, Jack Cousens, claimed that the competition at the pump is “broken” since supermarket gasoline sellers are no longer the first to pass on wholesale cost savings, which previously led to broad price reductions.
The need to develop a different strategy to revive pump-price competition now exists because that trigger seems to have vanished,’ he said.
The AA so supports the CMA’s need for immediate increases in pump price transparency.
The study was “undertaken at speed,” according to a representative for UKPIA, a trade organisation for the fuel industry that includes refineries, who also promised to keep “working constructively” with the CMA and the Government “to fully understand the concerns which have been highlighted.”
The UK normally enjoys a competitive domestic supply chain, and prices are typically largely influenced by fluctuations in crude oil prices and other supply and demand factors, which have been particularly volatile in 2022, the speaker continued.
Taxes are a big expense that contribute significantly to pump prices.
We would like to point out that UK gasoline and diesel prices have continuously been among the lowest in western Europe when fuel duty and tax are taken out.