UK fuel prices 2023: CMA says supermarkets partly to blame for high petrol and diesel costs

A lack of competition between supermarkets is partly to blame for the high fuel prices, the competition watchdog has said, with increased profit margins hiking them by roughly 5p per litre.

The Competition and Markets Authority (CMA) said that while global factors such as the war in Ukraine were behind the majority of recent fuel price rises, “higher pump prices cannot be attributed solely to factors outside the control of the retailers”. It said that weakened competition between supermarkets - who dominate the UK fuel market - appeared to have driven up their profit margins at the expense of motorists.

Giving an update on its road fuel market study, the CMA said that the major supermarkets were enjoying higher margins than ever and as a result, fuel prices are around 5p per litre more than they would have been had margins stayed at 2019 levels. 

It said there was evidence of one supermarket chain significantly increasing its margin targets over the last four years and said other supermarkets might have adjusted their policy in response, forcing up prices at the pumps. 

It also said there was evidence of weaker competition around diesel prices compared with petrol costs since the start of 2023 and noted that the high margins “appear to have gone on longer than would be expected”. 

The CMA accused the supermarkets of delaying and withholding evidence to its study and now plans to conduct formal interviews with their senior management. 

Sarah Cardell, chief executive of the CMA, said: “Although much of the pressure on pump prices is down to global factors including Russia’s invasion of Ukraine, we have found evidence that suggests weakening retail competition is contributing to higher prices for drivers at the pumps. We are also concerned about the sustained higher margins on diesel compared to petrol we have seen this year.

“We are not satisfied that all the supermarkets have been sufficiently forthcoming with the evidence they have provided in our Road Fuel market study, so we will be calling them in for formal interviews to get to the bottom of what is going on. It is a priority for the CMA to publish a full and final report, including recommendations for action, by the beginning of July.”

The road fuel market study was launched as petrol and diesel prices soared in early 2022 and amid claims retailers were not passing on the fuel duty cut. The CMA found no evidence that the cut had been withheld but did say there was evidence of “rocket and feather” pricing. After reaching record highs in mid-2022 prices have fallen but motoring groups have repeatedly accused retailers, and supermarkets in particular, of failing to pass on the full savings as wholesale costs drop. 

RAC fuel spokesman Simon Williams said: “We are very pleased to hear that the Competition and Markets Authority has confirmed what we have been saying for a long time about the biggest retailers taking more margin per litre on fuel than they have in the past. 

“Currently, the average price of diesel is more than 20p a litre overpriced simply because they refuse to cut their prices. The wholesale price of diesel is actually 4p lower than petrol, yet across the country it is being sold for 9p a litre more – 154.31p compared to 144.95p for unleaded.

“Something badly needs to change to give drivers who depend on their vehicles every day a fair deal at the pumps. We hope even better news will be forthcoming later this summer.”

AA president Edmund King added: “Today’s CMA’s decision is hugely welcome in confirming what millions of UK drivers have long believed, that they too often get a raw deal at the pump. Hopefully, it will compensate for the damage done to family and business finances by bloated pump prices since 2021.

“Since the pandemic, competition between forecourts has too often and in too many places been non-existent. The current diesel price scandal and the fiver-a-tank cost difference between neighbouring communities are just two examples. More recently, a handful of maverick small forecourts slashing prices, saying they can still stay commercially viable, has exposed the shame of the other retailers.”

NationalWorld has contacted the UK's major supermarkets for comment. Asda told NationalWorld that it would fully engage with the CMA. A spokesperson said: "Asda is the price leader in the supermarket fuel sector and we remain focussed on providing our customers with the best value at the pumps."