Introduction to the Debate
It’s a debate that has been raging since the end of the COVID pandemic, but despite the regulatory scrutiny, there is no clear answer to allegations that British motorists are paying too much for fuel. The cost of unleaded gasoline and diesel has been unusually high for years. According to fuel retailers, there is a simple explanation for this: the rising costs are being passed on to drivers. However, critics argue that there is a reason why the Competition and Markets Authority (CMA) has consistently found that motorists are paying more than they should, and that the discrepancy between wholesale costs and pump prices has widened in recent months.
The Oil Data
Oil prices are well below January levels, but fuel prices are clearly not. In recent weeks, Brent crude oil has traded between $62 and $64 a barrel, and yet motorists are currently paying an average of £1.37 a liter for petrol and £1.46 for diesel. The average pump cost in January was £1.39 and £1.45, despite significantly higher oil costs at the time. Prices can be influenced by all sorts of factors, including the value of the pound against the oil-priced dollar, but this disparity is notable.
The Impact of Refinery Closures
There is another emerging factor to consider: the decline of domestic fuel production. There are only four operating refineries producing petrol and diesel in the UK, following the closure of two major sites this year. The decline sparked industry warnings of a crisis due to the government’s high carbon levies in the UK, which have left domestic fuel producers uncompetitive with imports. The loss of the Grangemouth refinery was particularly serious, as it left Scotland without domestic production and at the mercy of a more complicated and expensive supply structure.
The Case for the Prosecution
Fuel price activists and car companies have long accused the industry of increasing its profit margins. Supermarkets focused their pricing investments elsewhere as the cost of living crisis deepened, but the days of leading an industry-wide fuel price war are long gone. Reports from the AA and RAC highlight price spikes despite a 5p fall in wholesale costs two weeks ago. The AA said that at the peak of the rise, it was in line with what was seen in mid-June, and then the pump average reached a maximum of 135.8p by the end of July.
The Position of the Fuel Industry
The fuel industry pleads "not guilty." The bodies representing retailers point out that the CMA and its wider critics are failing to take into account the huge cost increases they have faced over the last four years, costs that are being, or have been, passed on throughout the economy. These include costs for energy, business tariffs, minimum wage, employer’s social security costs, and record amounts of money from petrol station crime. The Petrol Retailers’ Association (PRA) told Sky News that average margins across the sector were now the same as a year ago at 3% to 4% after costs.
The Role of the Regulator
The CMA’s road fuel market study committed to monitoring the market and recommended a mandatory fuel search system to increase competition. The CMA hopes that customers will vote with their feet by forcing every retailer to reveal their prices in real time. The CMA could argue that the government has been slow to implement its fuel search advice. While the Conservatives accepted it, Labor is now pushing it through Parliament.
Conclusion
This debate is all about transparency, but we clearly don’t have a full view of the complicated and changing supply chain that can influence pump prices. The CMA hopes that postcode lotteries for pump costs will ease as motorists become aware of the opportunity to compare and shop around. However, the main reason why this issue remains unresolved is that the CMA’s findings have so far been incomplete. The findings that pump costs were too high were all made without fully considering the retailers’ operating costs.
The Way Forward
The CMA’s next market update is expected in a few weeks and will take into account more comprehensive cost data for the first time. A spokesman told Sky News that the Government aims to introduce the Fuel Finder scheme by spring 2026, which will provide drivers with real-time pricing information, helping them find the cheapest fuel and putting pressure on retailers to stay competitive. The hope must be that both sides can, for the first time, accept the report’s findings, ending this bitter debate once and for all.
