Summer Spike and Supermarket Margins
Since May 2023, UK fuel prices have experienced a significant surge, leaving drivers grappling with an increase of at least 11 pence per litre. The Competition and Markets Authority (CMA) is sounding the alarm after observing a troubling trend in retail fuel spreads during the autumn months.
CMA’s Call for Oversight and Government Action
In July 2023, the CMA proposed the establishment of a monitoring body to revitalize competition in the road fuel market. The UK government embraced the recommendation, with the CMA now publishing its first report, indicating a need for ongoing scrutiny. While awaiting formal legislation, the CMA plans to release quarterly reports, shedding light on the dynamics of the market.
Fuel Prices Analysis
The CMA’s examination of fuel prices from May to October 2023 reveals a complex narrative. Petrol and diesel prices have collectively risen by 11.1 and 13.9 pence per litre, respectively. Global factors, such as increased crude oil prices, played a role during the summer months. However, a lack of competitive response from fuel retailers in the face of decreasing wholesale prices in September and October raises concerns about sustained trends.
Pump Price Breakdown
For petrol, prices surged from 142.9ppl in May to 154.0ppl by October. Diesel experienced a similar trajectory, with prices climbing from 147.9ppl to 161.8ppl over the same period. The CMA remains vigilant, monitoring developments to draw conclusive insights.
Fuel Margin Decline for Supermarkets
Supermarkets’ fuel margins, the difference between purchase and selling prices, experienced a notable decline from May to August. Although average margins fell by around 4.5ppl during this period, the CMA acknowledges that September and October data is pending. This decline, while observed, still keeps 2023 margins higher than any year before 2021.
Retail Spread Analysis Raises Concerns
Examining the retail spread, the CMA notes significant increases in September and October for both petrol and diesel. The retail spread at the end of October exceeded the long-term average of 5-10ppl, sparking concerns about the intensity of retail competition. The CMA emphasizes the need for sustained monitoring to gauge the sector’s competitiveness.
Data Collection Challenges and CMA’s Response
Despite challenges in data collection, the CMA issued requests for information to major retailers. Responses were received from a significant number, but the absence of two major retailers limited the depth of the analysis. The CMA’s Chief Executive, Sarah Cardell, emphasizes the importance of a comprehensive and permanent monitoring system to capture the market’s full dynamics.
Sarah Cardell’s Insight and Call for Ongoing Monitoring
Sarah Cardell, Chief Executive of the CMA, highlights the mixed factors influencing rising pump prices. While summer saw increased wholesale costs, recent trends are cause for concern about the effectiveness of competition. Cardell stresses the importance of continuous monitoring and calls for the establishment of a permanent fuel monitor with broader information-gathering powers.
Temporary Pricing Data Scheme and Future Legislation
CMA’s Efforts for Transparency
Separately, the CMA’s temporary pricing data scheme, involving 12 retailers, aims to provide open and transparent pricing information. Representing over 40% of UK forecourts, this scheme aids third parties like petrolprices.com and the AA. The UK government plans to legislate for a mandatory, real-time pricing data scheme, consulting on it later this year.
Supermarkets Maintain Competitive Edge
Despite the challenges, supermarkets remain, on average, cheaper than other retailers, maintaining a pricing gap of 4-6ppl since 2017. The CMA’s ongoing efforts seek to ensure transparency and competition in the UK fuel market, providing relief to drivers feeling the strain of rising pump prices.