Fuel retailers have been accused of using motorists as “cash cows” after a consumer watchdog found that drivers were paying more for petrol and diesel than before the Covid pandemic because of “weakened” competition.
In a win for consumers, they will be able to compare prices in real time in any area of the UK, through a new fuel price reporting scheme.
Drivers will be able to easily identify those charging fair prices and those failing to pass on savings from falling wholesale costs.
The government will change the law to force retailers to comply by providing up to date price information, which is expected to lead to greater transparency and competition – in turn driving down prices and easing people’s cost of living.
The new scheme will make pricing data available for third parties – paving the way for them to create price comparison apps and websites – supporting the digital economy and helping growth.
It follows publication of a Competitions and Markets Authority (CMA) report into the price of petrol and diesel.
CMA fuel report findings
From 2019-22, average annual supermarket margins have increased by 6 pence per litre.
Increased margins on diesel across all retailers have cost drivers an extra 13 PPL from January 2023 to the end of May 2023.
Motorway service stations are charging around 20 PPL more for petrol and 15 PPL more for diesel compared to other fuel stations
Supermarkets are generally the cheapest places to buy fuel, with Asda typically the cheapest of those.
Grant Shapps, energy security secretary, said: “Some fuel retailers have been using motorists as cash cows – they jacked up their prices when fuel costs rocketed but failed to pass on savings now costs have fallen.
“It cannot be right that at a time when families are struggling with rising living costs, retailers are prioritising their bottom line, putting upwards pressure on inflation and pocketing hundreds of millions of pounds at the expense of hardworking people.
“Today I’m putting into action the CMA’s recommendations and standing by consumers – we’ll shine a light on rip-off retailers to drive down prices and make sure they’re held to account by putting into law new powers to increase transparency.”
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The CMA found that in 2022, Asda and Morrisons each made the decision to target higher margins.
Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled their margin target in the same period.
Other retailers, including Sainsbury’s and Tesco, did not respond in the way you would expect in a competitive market and instead raised their prices in line with these changes.
Taken together, the CMA suggests this indicates that competition has weakened and reinforces the need for action.
Diesel prices have been slow to drop in 2023, partially down to Asda reducing pump prices more slowly as wholesale prices fell.
The CMA identified that there are significant price differences in local areas, and that the difference between the highest and lowest prices in local areas has increased as average fuel prices have risen.
Lower prices are typically associated with having a supermarket retailer nearby, and where there are no supermarkets, for example, in remote areas, fuel retailers are likely to have higher costs and prices are likely to be higher.
The price premium at motorway service stations has grown in real terms since 2012, and price variation on motorways is low, due to limited competition between service stations.
The CMA has also imposed fines totalling £60,000 on Asda for failing to provide relevant information in a timely manner.
Asda received two fines, each of £30,000 (the statutory maximum), for sending a representative to attend a compulsory CMA interview who was not equipped to provide evidence on certain topics the CMA had identified in advance.
The supermarket also failed to respond completely to a compulsory written request for information.
Asda has now provided the CMA with the required information.