As profit margins surge, it's hard not to feel drivers are being taken for a ride on fuel prices
Retailers insist they're working hard to give drivers value but profits are up and pump prices don't reflect the wholesale situation
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British drivers have endured more than three years of, at times, ridiculous fuel price changes. From the £1 per litre days of the lockdown, when no-one could take advantage of low prices, to last summer when petrol reached more than 191p and diesel hit almost £2 a litre.
Since then, pump prices have gradually fallen and in early May petrol fell below 145p per litre for the first time in 18 months. But that’s still more than the long-term record high of 142.5p, set back in 2012 and which stood until October 2021.
Petrol retailers will point to the impact of the Ukraine war and the volatility of the oil markets since last March but prices were rising before that and it’s hard not to feel that, as households continue to face financial struggles, drivers are being taken for a ride by retailers looking for easy profits.
Recent figures from RAC Fuel Watch show that the average profit margin on a litre of petrol is 10p. For diesel it’s a massive 21p. Prior to the pandemic, the long-term margin on both fuels was around 7p per litre.
Yes, filling stations are businesses and their entire purpose is to make money. And, yes, they endured tough years during the pandemic but Shell and BP reported record profits last year and the Competition and Markets Authority (CMA) recently said that supermarkets - which dominate the UK fuel scene - are partly to blame for continued high prices, identifying one that was extending its fuel profit margins as a matter of policy.
Supermarkets claim they’re committed to value at the pumps but there’s clearly opportunism at work as retailers use the volatility of oil prices to justify their high prices, even when those wholesale prices have fallen back below to pre-war levels.
Diesel drivers, in particular, have a right to feel that they are being ripped off given that it is now 4p cheaper than petrol on the wholesale market yet remains 7p more expensive at the pumps on average. The wholesale cost of the fuel is now at the same level as in September 2021 yet the forecourt cost is 18p a litre more and margins are three times their historic norm.
Evidence of how unfairly drivers are being treated is all around as the lower price of diesel is reflected by some outlets but not others. Where I live in semi-rural Scotland both fuels have historically been more expensive than in the big urban centres. Now, my local BP and Esso stations are selling petrol at 144.9p and diesel at 143.9p. But 30 miles away in Edinburgh, petrol is the same price while diesel is up to 8p per litre more expensive. And the supermarkets which once undercut other filling stations are charging the same or more than big oil brands.
The fact that one independent filling station in Shropshire - without the buying power of the supermarkets - can sell diesel for 131p a litre hints at just how well the big chains are doing out of us, as does the fact that members-only Costco is charging less than 135p for both fuels.
When even the usually circumspect CMA is raising concerns that weak competition is keeping prices higher than necessary for longer than necessary, it’s pretty clear that motorists are getting a raw deal. The CMA is still compiling its report into the issues around fuel pricing and it's not clear what action it could take to force better competition but there are other methods that could force filling stations to treat drivers more fairly.
One solution would be to introduce a nationwide fuel price tracker, as is reportedly being considered by Chancellor Jeremy Hunt.
In Northern Ireland fuel prices are lower than anywhere else in the UK - something partly attributed to a weekly round-up of regional prices. A more comprehensive real-time tracker that compares individual filling stations - such as those in use in France and Germany would be harder to implement but could really help. Allowing drivers to directly compare local filling stations and choose the one who is offering the best deal would stimulate competition which has clearly been lacking for quite some time.
Motoring groups warn that such an approach wouldn't solve all the problems but it's clear that something needs to change, and quickly, to save drivers from ongoing exploitation at the pumps.