There is evidence that “rocket and feather” fuel pricing – when fuel prices rise as wholesale costs rise, but then fall more slowly than costs come down – has taken place in 2022, according to the Competition and Markets Authority (CMA).
The analysis is part of an initial update on the CMA’s Road Fuel Market Study from the Competition, which was launched in July. The study follows on from an urgent review that had been commissioned by the government to look at whether the cut in fuel duty, announced in March 2022, had been passed on to consumers.
The watchdog’s analysis also reveals that:
- Prices rose by around 50p a litre from January to July, the largest leap in fuel prices ever recorded in one year, before falling by 31p for petrol and 14p for diesel since.
- The gap between diesel and petrol prices has become larger than ever reliably recorded. Diesel now costs 24p more per litre than petrol.
- Prices vary widely between local areas. The CMA looked into what may be causing high prices in certain areas and found that prices are likely to be higher at petrol stations where there are few (or no) competitors nearby – and particularly where there is no local supermarket petrol station.
- Annual retailer fuel margins are increasing, but the causes are not yet clear. Between 2017 and 2021, the difference between the price retailers paid for fuel and the pump price rose by the equivalent of 2-3p a litre on diesel and 3-4p a litre on petrol.
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. The question for the CMA is whether a lack of effective competition within the UK is making things worse. Although it is only a small proportion of the overall price, the increase in margins for many fuel retailers over the last few years is something we need to investigate further. The key thing we need to establish next is whether this development is down to competition problems or not.”
The CMA will publish a further update, including options for possible next steps, in the Spring.
