‘Slash petrol prices NOW’: RAC issues warning to retailers to play fair with motorists

Drivers should be paying around 6p less for a litre of petrol, shaving the cost of filling up by more than GBP3, according to the RAC.

Having crunched the numbers on inflated margins, falling wholesale fuel prices and the strengthening of the pound against the dollar, the motoring group says retailers have scope to reduce pump prices to 'regain the trust of drivers'.

It says a failure to 'dramatically' reduce prices this week should see the Competition and Markets Authority intervene after the watchdog last year found that the fuel sector had overcharged motorists to the tune of GBP1.6billion.

The regulator is currently consulting on imposing significant financial penalties on forecourt operators who fail to provide live updates about changes to petrol and diesel prices as part of a 'Pumpwatch' scheme.

The latest RAC Fuel Watch report shows that retailers are pocketing average margins of 13p for unleaded and 15p for diesel.

Before the pandemic, operators over an extended period turned a profit with margins of just 8p on both fuels.

Last week, the delivered wholesale price - the amount retailers pay for fuel - of petrol dropped to an average of 103p a litre.

If retailers played fair with drivers by passing on this wholesale saving and reduced their margins to 10p, the average prices of petrol would be just under 136p per litre including VAT - a whole 6p lower than the current UK average of 142p.

This would equate to a saving of GBP3.30 each time the owner of a family car with a 55-litre fuel tank fills up.

Diesel, which is currently averaging 147p, should be being sold for 139p with a 10p retailer margin given the wholesale price of 106p. It means drivers are missing out on an average fill-up saving of GBP4.40.

UK more expensive to fill up than the rest of Europe

Staggeringly, high retailer profit margins on top of a refusal to slash prices gives the UK the 'questionable honour' of having the most expensive diesel in Europe for 16 of the last 17 weeks - even when taking into consideration the 5p-a-litre fuel duty discount which will be scrapped early next year.

The RAC says it is tracking a number of independent retailers who are significantly undercutting their much larger supermarket rivals.

At Portlethen in Scotland, a newly opened forecourt under the banner of EG On The Move was selling both petrol and diesel for 16p less than its nearest rival, Asda.

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This led to Asda quickly cutting its prices to match, rather than the retailers playing fair with drivers are reducing its forecourt prices beforehand.

The new site at Portlethen is one of several that have been opened in recent months in a deal between retailer Co-op and EG On The Move - the latter run by EG Group's Zuber Issar, whose brother Mohsin now runs the Asda empire.

EG Group sold the vast majority of its forecourts to Asda in a deal last year but retained 31 sites that are now being converted to EG On The Move forecourts.

At the famously cheap Essar-branded Grindley Brook independently run forecourt in Whitchurch, Shropshire, a litre of unleaded will only set drivers back 130.9p, and diesel 133.9p.

This is just slightly lower than membership-only retailer Costco which is charging an average of 130p for petrol at its 20 sites and 134.7p for diesel.

RAC head of policy Simon Williams said a refusal not to reduce prices by major fuel retailers is 'costing drivers dear, adding that it' is 'all the more outrageous when you factor in the temporary 5p cut in fuel duty'.

'While the Competition and Markets Authority has clearly stated drivers were overcharged last year, it's blatantly apparent from our data that this problem is persisting this year,' Mr Williams went on.

The RAC's data shows that the average price of a litre of unleaded sold by the big four supermarkets, which dominate UK fuel sales, is 138p and diesel is 143p.

Interestingly, their petrol is priced the same as the average price charged across the whole of Northern Ireland but diesel there is still 3p cheaper than at UK supermarkets, at an average of 139.7p.

'It's plain for all to see from some of the lower prices being charged around the UK, both across the whole of Northern Ireland and at various other forecourts, that fuel can and should be sold much more cheaply,' Williams added.

'Our analysis shows pump prices at a majority of forecourts should be cut by around 6p for both petrol and diesel. With wholesale prices down, drivers should not be seeing forecourt prices this high, especially as they are supposed to be benefitting from a 5p fuel duty cut.

'Our Fuel Watch data shows that this is happening as it should in Northern Ireland but, for whatever reason, it doesn't appear to be on this side of the Irish Sea.'

The Government plans to introduce a mandatory 'Pumpwatch' scheme, requiring retailers to share with drivers live information about their fuel pricing. The CMA is currently consulting on fine amounts for operators that fail to comply

Fuel retailers could be fined if they don't share live pricing info

The RAC says that if fuel prices do not fall dramatically in the next week, it believes the Government and CMA should probe big retailers for an explanation.

'Tough action needs to be taken to change this as drivers are losing out badly every time they fill up.

Artificially high pump prices also contribute to a higher level of inflation - so if prices were nearer where they should be, inflation would be lower, benefitting borrowers and the wider economy,' Simon Williams added.

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Measures are currently being drawn up to improve transparency over fuel pricing - and these could include financial penalties for retailers who refuse to share data.

The Government is consulting on the fine amounts, which could be a fixed penalty of 10 per cent of worldwide turnover, or a daily penalty equating to 5 per cent of daily turnover, or both, the guidance document states[1].

Once the consultation is complete, the Labour government should provide a timetable for the plans to introduce a mandatory Pumpwatch scheme for all retailers to provide live fuel pricing information.

Currently, retailers can voluntarily provide daily information.

Speaking to Forecourt Trader[2] earlier this month, the boss of the Petrol Retailers Association, which represents the nation's independent filling stations, forecourts at motorway services and supermarkets, says it is not yet clear if the act will require smaller dealer groups and single site operators to share pricing information.

Executive director Gordon Balmer said the PRA has been 'heavily involved' in discussions with the CMA to shape policy to provide a fair outcome for retailers as well as drivers.

References

1. ^ guidance document states (assets.publishing.service.gov.uk)
2. ^ Forecourt Trader (forecourttrader.co.uk)