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UK Watchdog Says Fuel Retailers’ High Margins Spark Overcharging Concerns

By  |  March 28, 2024
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The Competition and Markets Authority (CMA) has raised concerns over high margins for fuel retailers, suggesting that drivers might still be paying more than necessary at the pump. In a recent monitoring report following its fuel market study of 2022, the CMA highlighted that the difference between what retailers pay for fuel and the price they sell it at remains “concerning”.

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    The watchdog’s previous findings revealed that motorists were overcharged by a staggering £900 million in 2022, primarily due to supermarkets failing to pass on cuts from falling oil prices. Despite fluctuations in crude oil prices, the CMA’s latest update covering the period from the end of October last year to the end of February indicated a consistent trend of high fuel margins.

    According to the report, supermarket margins rose from 7.6% in the previous year to 7.8% in 2023, while other retailers saw their margins soar to 9.1% compared to 7.3% in 2022. The CMA emphasized that these figures were “not a good sign for drivers,” although it refrained from explicitly stating that motorists were being overcharged.

    Both supermarket chains and independent retailers have consistently denied allegations of overcharging, with lobby groups such as the British Retail Consortium (BRC) and the Petrol Retailers Association (PRA) staunchly defending their practices. Supermarkets, historically known for offering the cheapest fuel, have utilized petrol and diesel prices as incentives to attract customers to their stores. However, the landscape shifted during the COVID-19 pandemic, leading to increased fuel margins as grocery chains diverted resources to absorb rising costs in other areas.

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    The PRA, representing independent retailers, emphasized that many of its members offered fuel at lower prices compared to supermarkets, attributing the increased costs to factors such as energy expenses, national living wage adjustments, business rates, and heightened incidents of shoplifting and fuel theft.

    Despite efforts to enhance transparency through a voluntary price watch scheme aimed at informing drivers of local fuel prices, the CMA remains convinced that competition in the road fuel retail market has weakened overall. The regulator’s report underscores the ongoing challenges faced by drivers in navigating a complex and often opaque fuel pricing landscape.

    As fuel prices continue to fluctuate amidst global geopolitical tensions and economic uncertainties, the debate surrounding fair pricing practices in the fuel retail sector is likely to persist, with regulators and industry stakeholders alike facing mounting pressure to address consumer concerns and ensure transparency in pricing mechanisms.

    Source: News Sky