Fuel prices: UK supermarkets maintain profit margin despite October price drop

The UK's major supermarkets are still overcharging drivers for fuel, despite October bringing an end to a four-month run of rising prices, new analysis shows. The average price of petrol fell by 2p a litre in October but data from RAC Fuel Watch shows most drivers across the UK are still paying far too much at the pumps.

The average price of a litre of unleaded fell 2.6p from 157.12p to 154.53p last month but that is 'no cause for celebration', according to RAC fuel spokesman Simon Williams. The British automotive services company argues petrol should really be on sale for around 145p whereas diesel, which came down by a penny to 161.4p in October, ought to be selling for 156p a litre.

Mr Williams said: “While four months of rising petrol prices came to an end in October, it’s definitely no cause for celebration that the drop was only 2p a litre as our data shows it should have been far greater. Instead, drivers will be outraged to learn they are still not being charged a fair price at the pumps by the big four supermarkets which dominate UK fuel retailing.

“This is dramatically demonstrated by the fact that one small independent retailer in rural Shropshire is selling petrol for 11p cheaper than the supermarkets."

Data from the fuel finder feature in the myRAC app shows that at Whitchurch in Shropshire, independently run Grindley Brook Garage is charging just 140.9p for petrol – nearly 14p less than the UK average, which is equivalent to a saving of £7.50 a tank.

The app also shows there are three other independent retailers within five miles selling petrol for well under 150p – 5p less than the UK average. Diesel at Grindley Brook, run by DA Roberts, is 151.9p – nearly 10p less than the UK average, a saving of more than £5 on a complete fill-up.

Mr Williams said: “Every day the supermarkets put off reducing their prices to fairer levels that reflect the lower wholesale market, is another day of extra profits for them, and another day of drivers having to fork out more money than they should have to for their fuel."

He added: “Despite the Competition and Markets Authority’s investigation concluding in the summer that the supermarkets had overcharged drivers by an incredible £900m last year, history sadly seems to be repeating itself.

The supermarket chains have been gradually extending their margins since 2016 but took advantage of last year’s market volatility to ramp them up sharply. In July 2023, RAC analysis found on average, Asda, Sainsbury’s, Tesco and Morrisons have extended their margins on petrol and diesel from just under 5p per litre prior to the Ukraine war in February to just below 10p per litre now.

The same month, the Competition and Markets Authority (CMA) told MPs that Asda had tripled its fuel profit margins since 2019. The announcement came in the wake of a wider CMA report which said weakened competition in the market had led to drivers being overcharged to the tune of £900 million since 2019. 

Fuel duty is currently being discounted by 5p a litre to ease the cost-of-living burden on UK drivers, a measure bought in by Rishi Sunak in March 2022 and extended for a further 12 months in the 2023 Spring budget. However, RAC argue the fuel duty cut is not being passed on to drivers with forecourt charges failing to come down and reflect wholesale market figures.

“We highlighted these issues to the CMA, the Treasury and the Department for Energy Security and Net Zero last week," Mr Williams said. "So we were pleased to see that Energy Secretary Claire Coutinho has written to retailers making it clear they must pass on savings to drivers otherwise she will name and shame them.”

The RAC’s analysis also reveals membership-only retailer Costco is selling unleaded for an average of 141.7p at its 20 sites – 13p below the UK average with its lowest price being 138.9p in Birmingham. Its average price for diesel is 151.7p – 10p less than the UK average, but its Derby site is selling for 148.9p.

In stark contrast the average prices charged at the big four supermarkets nationally is 151.72p for petrol – down 2.3p in October – but almost 11p more expensive than independently run Grindley Brook in Shropshire. Supermarket diesel ended October at 159.24p, up nearly a penny in the month, but more than 7p dearer than Grindley Brook.