Competition watchdog finds evidence of ‘rocket and feather’ fuel pricing

A watchdog investigation into how much drivers have to pay to fill up with fuel this year found examples of “rocket and feather” pricing.

The Competition and Markets Authority (CMA) said it was the ‘most volatile’ year for fuel prices since reliable data began, with pump costs rising by about 50 pence per liter from January to July – the biggest jump in a year – before decrease by 31p for petrol and 14p for diesel.

It said it had found “some evidence” that in 2022 retailers quickly increased pump prices in response to rising wholesale fuel costs – the “rocket” – but then failed to pass on any savings as those costs fell – the “spring”.

Today’s update to the CMA has shown retailers pocketing larger margins than before as it continues its research into gasoline prices.

It stated that the difference between the price retailers paid for fuel and the pump price increased from 2017 to last year by between 3 and 4 pence per liter for petrol and between 2 and 3 pence for diesel.

The CMA said the cause of this was “not yet clear” and claimed it “could be explained by other cost increases for retailers or weaker fuel competition.”

The analysis also saw “some evidence” of missile and feather behavior emerging this year, despite no instances of it being found in the previous four years.

It said this was particularly the case with diesel, as retailers failed to pass on declining wholesale costs at gas stations.

“This could be caused by the extreme volatility of prices and supply in 2022,” the CMA said.

Both areas will be further explored as part of the ongoing project.

Earlier this year, the CMA had been instructed by the government to conduct an urgent market survey to determine whether the March fuel tax cut announced by then Chancellor Rishi Sunak had been passed on by the industry to hard-up motorists.

It concluded that rising oil refining margins ahead of the surge in fuel prices in the immediate aftermath of the duty cut, but committed in July to an in-depth review of fuel station pricing, including to examine why petrol and diesel are more expensive in some regions in comparison with others.

This included analysis of company-level financial data from retailers, refiners and wholesalers looking back at records from the past five years.

Today’s update highlighted that the cost to fill up “differs greatly” between local areas, blaming the steeper prices for regions where there are few or no competitors nearby, and particularly where there is no local supermarket filling station.

It has agreed to investigate this further.

The watchdog also found that the difference between diesel and petrol prices has become ‘wider than has ever been reliably measured’, with diesel now costing around 24 pence per liter more than unleaded.

According to the CMA, this is largely due to Western Europe’s dependence on diesel imports from Russia.

The watchdog’s interim director, Sarah Cardell, said: ‘It’s been a terrible year for drivers, with filling up a vehicle being a moment of fear for many.

‘Due to the disruption of imports from Russia, diesel drivers in particular are paying a hefty premium because of the invasion of Ukraine.

A weaker pound also contributes to higher prices across the board.

“There are no easy answers to this.”

Ms Cardell added that the CMA is considering whether a ‘lack of effective competition’ in the UK is ‘making things worse’ for drivers.

The RAC said that while it was “encouraging” that the CMA has found evidence of “rocket and feather” awards taking place this year, it believes there is “clear evidence” of this happening in 2021, 2019 and 2018.

The auto group has already pointed the finger at the ‘big four’ supermarkets that are ‘holding on to huge margins for their lives’ post-pandemic, saying the market should provide immediate relief to motorists this month as many plan to road driving festive period.

The fuel spokesman, Simon Williams, said: “Volatility has undoubtedly been a problem in fuel prices since Russia invaded Ukraine, but when wholesale prices fall for weeks on end drivers should see pump prices do the same at a similar pace – unfortunately our data shows see that this is not often the case.

“What is happening now – just like last December – is a huge downward shift in the price of wholesale fuel with a slow decline in gas station prices.

“As a result, drivers are more expensive on the road this Christmas than it should be.

“The wholesale price of petrol has fallen from 130 pence a liter in early October to 109 pence yesterday – a drop of 21 pence.

‘Meanwhile, the average price of unleaded lead peaked at 166.88 pence at the end of October, but has fallen only 8 pence to date to 158.91 pence.

“The situation with diesel is even worse as it is down 33 pence over the same period, but the average selling price only fell 8.4 pence yesterday from 191.12 pence to 182.71 pence,” he added .

“We are strongly urging the largest retailers to lower their prices. Unfortunately, we fear that they will hold out, hoping for an increase in oil prices later this month.’

The AA said a focus on the pump-price zip code lottery is long overdue, saying it has records of “major prize disparities between communities that are literally a stone’s throw away from each other.”

Luke Bosdet, his fuel expert, added: ‘The massive rises in pump prices have been one of the biggest contributors to inflation hammering UK consumers.

“One of the biggest concerns is how quickly fuel retailers have reacted to the volatility in wholesale prices, both up and down.

“The drivers’ view is that pump prices rise much faster than they fall in response to changes in wholesale costs.”

Howard Cox, the founder and front man of the FairFuelUK campaign, said he was ‘delighted’ that the CMA is continuing to investigate the fuel industry.

“Hallelujah, but why has it taken them so long to come to that conclusion?

“Millions of drivers will struggle to see how the CMA fails to recognize that profiteering is rampant in the fuel supply chain,” he said.

“The flight from consumers and the economy has been extremely evident not just over the past three years, but at many times over the past decade.

However, it is gratifying to see that the CMA has finally conceded rocket and feather pricing to the pumps, but only for 2022.

“Ask any driver, they’ll say it’s been going on for years.”