Fuel profit margins still persistently high, says watchdog

Drivers could be paying more than they should for petrol and diesel after the UK’s competition watchdog said fuel profit margins remain at “persistently high levels” despite prices at the pump having fallen.

The Competition and Markets Authority (CMA) also challenged retailers’ claims that this was a result of higher operating costs, and said competition in the sector was “weak”.

However, the Petrol Retailers Association said falling fuel prices were an indication of healthy competition.

The CMA’s report was published as the government prepares to launch its “fuel finder” scheme, which will allow drivers to compare real-time fuel prices.

Petrol was 136.8p per litre last week, according to government tracking, while diesel was 146.1p per litre.

The CMA report found that fuel prices had fallen “significantly” since it last studied the issue in 2023, largely due to lower oil prices.

However, it said profit margins on fuel for both supermarket and non-supermarket retailers were “historically high”.

“Average fuel margins on a percentage basis have continued to increase for both supermarket and non-supermarket retailers,” it said.

The report noted fuel retailers’ arguments that their operating costs had increased, but if this were the case, “we would expect to see this reflected in declining profit margins”.

The CMA said if there was more competition, drivers would see better fuel prices at the pump.

Retailers will have to sign up to the planned fuel finder scheme and report price changes within 30 minutes of them being implemented.

The CMA said the finder would be accessible through apps and satnavs, and allow drivers to easily compare prices.

“In turn, this should incentivise retailers to compete harder for customers, placing downward pressure on prices.”

The CMA will take action against retailers who breach the conditions of the fuel finder, which could include fines.

Dan Turnbull, senior director of markets at the CMA, said: “Fuel margins remain at persistently high levels – and our new analysis shows operating costs do not explain this.

“We know fuel costs are a big issue for drivers, especially at this time of year with millions making journeys across the country.”

The Petrol Retailers Association (PRA) said it would “continue to work constructively with the CMA” and would engage with the fuel finder scheme.

Gordon Balmer, the executive director of the PRA, said: “Operating costs alone do not account for higher fuel margins, yet retailers continue to face steep rises in labour, taxation, energy and crime.

“Comparisons with historic margins overlook these significant cost increases.

“Pump prices are considerably lower than the peaks observed in 2022 and 2023, corresponding with falls in wholesale fuel prices, indicating strong competition between retailers.”

Both the RAC and the AA said drivers were being overcharged for fuel.

The AA said that, since November, the wholesale cost of petrol has fallen more than 7p per litre but the average petrol pump price had fallen by just two-thirds of a penny.

“It comes as millions of drivers take to the road for Christmas and are being overcharged for their fuel,” the motoring body said.

“Drivers are being taken for a ride at the pumps, as the CMA clearly illustrates.”

RAC head of policy Simon Williams said: “Many drivers won’t be surprised to hear that they’re still paying too much for their fuel, especially judging by the complaints we receive about large price variations from area to area.”

He said retailers’ arguments of higher operating costs had “now been clearly rejected” by the CMA.

“We sincerely hope the new fuel finder scheme, combined with ongoing scrutiny from the CMA, finally leads to increased competition and lower forecourt prices for drivers right across the country.”