‘Cut petrol prices NOW’: RAC warns retailers to deal fairly with motorists

According to the RAC, motorists would pay around 6p less for a litre of petrol, reducing the cost of filling up by more than £3.

After analysing figures on inflated margins, falling wholesale fuel prices and the stronger position of the pound against the dollar, the car industry group says retailers have opportunities to cut prices at the pump to “regain motorist confidence”.

The organisation said the lack of a “drastic” price cut this week could lead to the Competition and Markets Authority having to intervene, after the regulator found last year the fuel sector had overcharged motorists by £1.6bn.

The regulator is currently consulting on imposing significant financial penalties on petrol station operators who fail to provide up-to-date updates on changes in petrol and diesel prices, as part of a ‘Pumpwatch’ scheme.

The latest RAC Fuel Watch report shows that retailers are making an average margin of 13p on unleaded petrol and 15p on diesel.

Before the pandemic, operators had been making profits for an extended period with margins of just 8p on both fuels.

Last week the wholesale price of petrol (the amount retailers pay for fuel) fell to an average of 103p per litre.

If retailers were fair to motorists by passing on this wholesale saving and reducing their margins to 10p, average petrol prices would be just under 136p per litre, including VAT. That’s a whopping 6p lower than the current UK average of 142p.

This equates to a saving of £3.30 every time the owner of a family car with a 55-litre fuel tank fills up.

Diesel, which currently costs an average of 147p, should be selling for 139p with a retailer margin of 10p, given the wholesale price of 106p. This means drivers are missing out on an average saving of £4.40 per fill-up.

UK more expensive to fuel than rest of Europe

It is astonishing that retailers’ high profit margins, combined with the country’s refusal to cut prices, has given the UK the “dubious honour” of having the most expensive diesel in Europe for 16 of the past 17 weeks – even when you factor in the 5p per litre fuel discount, which is due to be abolished early next year.

The RAC says it is monitoring a number of independent retailers who are significantly underselling the prices of their much larger supermarket rivals.

A new filling station called EG On The Move opened in Portlethen, Scotland, selling petrol and diesel for 16p less than its nearest rival, Asda.

This led to Asda quickly cutting prices, rather than retailers already cutting prices at petrol stations.

The new Portlethen site is one of a number of locations to open in recent months under a deal between retailer Co-op and EG On The Move. The latter is run by EG Group’s Zuber Issar, whose brother Mohsin now runs the Asda empire.

EG Group sold the vast majority of its service stations to Asda last year, but retained 31 sites which are now being converted into EG On The Move service stations.

At the famously budget Essar brand, Grindley Brook, an independently run petrol station in Whitchurch, Shropshire, a litre of unleaded petrol costs just 130.9p, and diesel 133.9p.

This is slightly lower than members-only Costco, which charges an average of 130p for petrol across 20 locations and 134.7p for diesel.

Simon Williams, head of policy at the RAC, said the refusal of major fuel suppliers to cut prices was “costing motorists dearly”. He added that it was “all the more scandalous when you factor in the temporary 5p cut in fuel duty”.

“While the Competition and Markets Authority has been clear that drivers were overpaid last year, our data clearly shows that this problem is still occurring this year,” Williams continued.

The RAC data shows that the average price of a litre of unleaded petrol sold by the big four supermarkets (which dominate UK fuel sales) is 138p, while diesel is 143p.

Interestingly, the price of petrol is the same as the average price across Northern Ireland, but diesel is still 3p cheaper there than in UK supermarkets, with an average price of 139.7p.

“It is clear to everyone that fuel can and should be sold much cheaper, given the lower prices being charged in the UK, both across Northern Ireland and at a number of other fuel stations,” Williams said.

‘Our analysis shows that pump prices at most petrol stations need to be cut by around 6p for both petrol and diesel. With wholesale prices having fallen, motorists should not see petrol station prices as high, especially as they should benefit from a 5p cut in fuel duty.

‘Our Fuel Watch data shows this is happening in Northern Ireland as it should, but for some reason it doesn’t seem to be happening on this side of the Irish Sea.’

Fuel retailers can be fined if they do not share up-to-date price information

The RAC says if fuel prices don’t fall dramatically in the coming week, the government and CMA should investigate major retailers for an explanation.

‘We need to take drastic action to change this, because motorists lose out every time they fill up. Artificially high pump prices also contribute to higher inflation. So if prices were closer to where they should be, inflation would be lower, which would be good for borrowers and the wider economy,’ added Simon Williams.

Measures are currently being developed to improve transparency on fuel prices, including fines for retailers who refuse to share data.

The government is consulting on the level of the fines, which could consist of a fixed fine of 10 percent of global turnover, or a daily fine equal to 5 percent of daily turnover, or both. The accompanying document states.

Once the consultation is complete, the Labour government must set out a timetable for plans to introduce a mandatory Pumpwatch system, allowing all retailers to provide up-to-date fuel price information.

Currently, retailers can provide daily information on a voluntary basis.

Speaking with Forecourt Trader Earlier this month, the head of the Petrol Retailers Association, which represents the country’s independent petrol stations, motorway service stations and supermarkets, said it was not yet clear whether the law would require smaller dealer groups and single station operators to share pricing information.

Executive Director Gordon Balmer said the PRA had been “closely involved” in discussions with the CMA to shape the policy to ensure a fair outcome for both retailers and drivers.