The UK's retail road fuel sector will face an in-depth competition review after an initial inquiry found some areas of concern. But competition authority CMA said the government's cut to road fuel duty has, mostly, been implemented and said market fundamentals played the majority role in recent price rises.
"On the whole the retail market does seem to be competitive, but there are some areas that warrant further investigation," the CMA said. One of these areas is what it called "significant differences" in price between many rural and urban areas.
The CMA was tasked by the government in June to investigate "whether the retail fuel market has adversely affected consumer interests", with regard to its March tax cut and other factors including the level of competition in the sector. The move was part of efforts to tackle record high pump prices.
The CMA's initial report said the duty cut had "on the whole" been implemented, and noted margins made by retailers were broadly unchanged over the past year, but it said a growing gap between prices for crude and for gasoline and diesel is "a cause for concern".
It said around a third of the rise in road fuel prices over the past year was down to higher crude prices, around 40pc was because of the increased gap between wholesale and retail values, and around 12pc was down to depreciation in the UK pound against the US dollar. Going by official government data on road fuel price changes in the past 12 months, this latter factor added more to the pump price than the government's duty cut took away.
"Increased demand post-Covid-19 recovery and reductions in supply (in particular due to the Russian invasion of Ukraine and the mothballing of refining capacity during Covid-19) appear to have played a role in driving up the refining spread," the CMA said. These factors have indeed all contributed to record high refining margins in recent months, and plants across Europe have been running at the highest possible rates to capture these.
The UK's Petrol Retailers' Association welcomed the CMA report, which it said "exonerates… retailers and leaves unanswered questions about the extent to which [motoring organisations and politicians] understand the retail fuel market at all".
"We hope the CMA's market investigation will lead to a more grown-up debate about how to achieve the best prices for drivers," it said.
UK retail fuel prices broadly stabilised in the weeks after the government's duty cut, but began to rise again in late April and were at record levels in the week to 4 July. The government is concerned about the effect of this on the economy and on inflation rates, which have been slowing and accelerating respectively.
The CMA will report again on its findings in the autumn.
