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  • Writer's pictureLove Ballymena

CMA sets out plan to help drivers get more competitive fuel prices

Petrol pump

A new fuel finder scheme to enable drivers access to live, station-by-station fuel prices on their phones or satnavs would help revitalise competition in the retail road fuel market, the CMA said today.

The scheme would be made possible by new compulsory open data requirements and backed by a new ‘fuel monitor’ oversight body. The proposals are the key recommendations by the Competition and Markets Authority (CMA) to UK government following its in-depth study into the road fuel market which found a weakening of competition in retail since 2019.

At present, retailers only provide information on prices at the petrol stations themselves. This makes it hard for drivers to compare prices and weakens competition. The fuel finder open data scheme would need statutory backing through legislation to ensure fuel retailers provide up-to-date pricing and make that available to drivers in an open and accessible format that can be easily used by third party apps such as satnavs or map apps, through a dedicated fuel finder app, or a combination of both.

The fuel monitor would monitor prices and margins on an ongoing basis and recommend further action if competition continues to weaken in the market. As the UK transitions to net-zero the demand for petrol and diesel will reduce. The fuel monitor will help us understand the impact of this on vulnerable consumers that remain dependent on petrol and diesel for longer, as well as those living in areas with limited choice of fuel stations.

The fuel monitor will ensure ongoing scrutiny of retail prices for petrol and diesel. We observed that following the interim update issued by the CMA in May 2023, the average price of road fuel fell in large parts of the UK. Over the last year, the CMA has investigated the road fuel market in detail and reached the conclusion that competition is not working well and greater transparency in pricing is needed to improve consumer confidence and bring down prices for drivers.

There is no evidence to suggest that there has been cartel behaviour taking place and the CMA has no plans to open an enforcement case.

The report found that:

  • From 2019-22, average annual supermarket margins have increased by 6 pence per litre (PPL)

  • Increased margins on diesel across all retailers have cost drivers an extra 13 PPL from January 2023 to the end of May 2023

  • With greater transparency and shopping around as effectively as possible, the driver of a typical family car could save up to £4.50 a tank within a 5-minute drive

  • 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. This has anchored prices in the past. 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 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 ‘feathering’ (reducing pump prices more slowly as wholesale prices fell) its prices and other firms not responding competitively to that. As a result, the CMA estimates that drivers have paid 13 PPL more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.

Sarah Cardell, Chief Executive of the CMA, said:

"Competition at the pump is not working as well as it should be and something needs to change swiftly to address this. Drivers buying fuel at supermarkets in 2022 have paid around 6 pence per litre more than they would have done otherwise, due to the four major supermarkets increasing their margins. This will have had a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.

"We need to reignite competition among fuel retailers and that means two things. It needs to be easier for drivers to compare up to date prices so retailers have to compete harder for their business. This is why we are recommending the UK government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time. This would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on satnavs and map apps.

"Given the importance of this market to millions of people across the UK this needs to be backed by a new fuel monitor function that will hold the industry to account. As we transition to net zero, the case for ongoing monitoring of this critical market will grow even stronger, so we stand ready to work with the UK government to implement these proposals as quickly as possible."

Local factors also contribute to how much drivers pay at the pump. 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 fuel finder scheme will be important to help people find the best deal possible but it is essential that the monitoring function keeps a close eye on local variations in prices.

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. A fuel finder scheme would allow drivers an easy way to see where they can find cheaper fuel in the area if they come off the motorway.

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.

  • Failing to respond completely to a compulsory written request for information.

Asda has now provided the CMA with the required information.

The final report on the Road Fuel Market Study is available to read in full.


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