A watchdog investigation into how much drivers are charged to fill up with fuel has found examples of ‘rocket and feather’ pricing this year.
The Competition and Markets Authority (CMA) said it had been the ‘most volatile’ year for fuel pricing since reliable records began, seeing pump costs surge by around 50p-a-litre from January to July – the largest leap recorded within a year – before falling by 31p for petrol and 14p for diesel.
It said it had found ‘some evidence’ of retailers in 2022 rapidly hiking pump prices in response to increasing wholesale fuel costs – the ‘rocket’ – but then failing to pass on savings when these costs dropped – the ‘feather’.
The CMA’s update today identified that retailers are pocketing bigger margins than they have done previously, as it continues its probe into petrol pricing.
Evidence of `rocket and feather´ pricing in 2022: The competition watchdog has found examples of retailers this year not passing on fuel savings to drivers as quickly as they should
It stated that the difference between the price retailers paid for fuel and the pump price rose from 2017 to last year by between 3 and 4p per litre for petrol and between 2 and 3p for diesel.
The CMA said the cause of this was ‘not yet clear’, claiming it ‘could be accounted for by other cost rises for retailers or weaker competition on fuel’.
Its analysis also ‘saw some evidence’ of rocket and feather behaviour emerging this year, despite having found no cases of this in the four years previous.
It said this was particularly the case with diesel, as retailers failed to pass on declining wholesale costs at forecourts.
‘This could be driven by the extreme volatility of prices and supply in 2022,’ the CMA said.
Both areas will continue to be investigated as part of the ongoing project.
Earlier this year, the CMA had been ordered by the Government to conduct an urgent review of the market to understand if the March fuel duty cut announced by then-Chancellor Rishi Sunak had been passed on by the industry to hard-up motorists.
It concluded that growing oil refining margins for a the sharp rise in fuel pricing in the immediate aftermath of the duty cut, but committed in July to an in-depth investigation into pricing at forecourts, including looking into why petrol and diesel is more expensive in some regions compared to others.
This has included analysis of company-level financial data, from retailers, refiners and wholesalers looking back over records for the last five years.
Today’s update highlighted that the cost to fill up ‘varies widely’ between local areas, blaming steeper pricing for regions where there are few – or no – competitors nearby, and particularly where there is no local supermarket petrol station.
It has committed to investigating this further.
Retailer profit margins in 2022 are larger than they have been for the previous four years, rising by 3-4p per litre for petrol and 2-3p for diesel, the CMA said
The watchdog also found that the gap between diesel and petrol prices has become ‘larger than ever reliably recorded’, with diesel now costing around 24p more per litre than unleaded.
This is largely due to Western Europe’s reliance on imports of diesel from Russia, according to the CMA.
The watchdog’s interim chief executive Sarah Cardell said: ‘It has been a terrible year for drivers, with filling up a vehicle now a moment of dread for many.
‘The disruption of imports from Russia means that diesel drivers, in particular, are paying a substantial premium because of the invasion of Ukraine.
‘A weaker pound is contributing to higher prices across the board too.
‘There are no easy answers to this.’
Drivers are set for a more expensive time on the roads this Christmas than it should be
Simon Williams, RAC fuel spokesman
Ms Cardell added that the CMA is considering whether a ‘lack of effective competition’ within 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’ pricing taking place this year, it believes there is ‘clear evidence’ of it happening in 2021. 2019 and 2018.
The motoring group has already pointed the finger at the ‘big four’ supermarkets ‘hanging on to massive margins for dear life’ following the pandemic, and says the market should provide instant relief to drivers this month as many intend to hit the road over the festive period.
The RAC said this week that fuel prices in November had fallen by half as much as they should have done, based on the decline in wholesale petrol and diesel costs during the month
Its fuel spokesman, Simon Williams, said: ‘Volatility has unquestionably been an issue in fuel pricing since Russia invaded Ukraine but when wholesale prices trend down for weeks at a time drivers should see pump prices do the same at a similar rate – unfortunately our data shows that this is not often the case.
‘What’s happening now – as it was last December – is a massive downward shift in the price of wholesale fuel with a slow dropping of forecourt prices.
‘Consequently, drivers are set for a more expensive time on the roads this Christmas than it should be.
‘The wholesale price of petrol has fallen from 130p a litre at the beginning of October to 109p yesterday – a drop of 21p.
‘Meanwhile, the average price of unleaded at the end of October peaked 166.88p, but has to date only fallen 8p to 158.91p.
‘The situation with diesel is even worse as it has plummeted by 33p over the same period but the average retail price has only come down by 8.4p from 191.12p to 182.71p yesterday,’ he added.
‘We strongly urge the biggest retailers to lower their prices. Unfortunately, we fear they are holding out, hoping for a rise in the price of oil later this month.’
How to save fuel while driving
Using really simple eco-driving techniques ‘can easily save the equivalent of 9p-a-litre’, says the AA.
For motorists desperately wanting to get the most out of the expensive fuel they’re currently pumping into their cars, we’ve compiled our top 10 best tips to drive as efficiently as possible
> Top 10 tips to drive efficiently and help you save money on fuel costs
The AA said a focus on the pump-price postcode lottery is long overdue, saying it has records of ‘big price differences between communities that are literally down the road from each other’.
Luke Bosdet, its fuel expert, added: ‘The huge surges in pump prices have been one of the biggest contributors to inflation that has hammered UK consumers.
‘One of the chief concerns has been how quickly the fuel retailers have responded to wholesale price volatility, both up and down.
‘The drivers’ view is that pump prices shoot up much more quickly than they come down in response to wholesale cost changes.’
Howard Cox, the founder and frontman of the FairFuelUK campaign, said he was ‘delighted’ that the CMA will continue to investigate the fuel industry.
‘Hallelujah, but why have they taken so long to come to that conclusion?
‘Millions of drivers will struggle to see how the CMA fails to recognise that profiteering remains rampant in the fuel supply chain,’ he said.
‘Fleecing consumers and the economy has not only been extremely obvious for the last three years, but in many periods throughout the last decade.
‘It is pleasing, however, to see the CMA has at last conceded ‘rocket and feather’ pricing at the pumps, but only for 2022.
‘Ask any driver, they will say it’s being going for years.’
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