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Supermarkets hike diesel and petrol prices more than needed, CMA finds

Supermarkets and fuel retailers pushing diesel and petrol prices higher than needed, competition watchdog finds

  • CMA said high fuel prices cannot be blamed solely on war in Ukraine 
  • Instead, ‘some weakening of competition’ has also contributed to push up prices
  • Fuel margins have increased across retail market, in particular for supermarkets

Fuel retailers, particularly supermarkets, have hiked diesel and petrol prices more than needed to boost profit margins, the competition watchdog has found.  

Recent high fuel prices paid by drivers cannot be solely blamed on factors outside the control of the retailers, such as the war in Ukraine, which has caused an increase in wholesale prices, the Competition and Markets Authority said.

Instead, the regulator found evidence that suggests that ‘some weakening of competition’ has pushed up prices at the pump.

Fuel prices: The CMA will be grilling supermarkets ‘to get to the bottom of what is going on’

‘Evidence gathered by the CMA indicates that fuel margins have increased across the retail market, but in particular for supermarkets, over the past 4 years,’ the watchdog said in an update of its ongoing probe into how much drivers are charged to fill up.

‘As a result of these increasing margins, average 2022 supermarket pump prices appear to be around 5 pence per litre more expensive than they would have been had their average percentage margins remained at 2019 levels.’

Although supermarkets still tend to be the cheapest retail suppliers of fuel, the CMA said that ‘evidence from internal documents indicates that at least one supermarket has significantly increased its internal forward-looking margin targets over this period’. 

This ‘change in approach’ may have led other supermarkets to adjust their pricing too, it added. 

The watchdog’s update comes as separate findings show that retailers are pocketing far larger profits from both fuel types than they were before the pandemic.

In 2019, the average margins were 6.5p for every litre of petrol and 6.9p for diesel, the RAC says. 

The calculation on current prices shows retail margins on unleaded almost twice as high (12p per litre) and diesel more than three times bigger (23.7p per litre).

On Sunday, the average pump price of petrol fell to 144.95p a litre, with diesel sold 9p higher at 154.31p a litre – despite the wholesale price of diesel being actually 4p lower than petrol, according to the RAC.

The CMA said that it was concerned about the ‘sustained higher margins on diesel compared to petrol’ so far this year, which ‘appear to have gone on longer than would be expected’. 

The CMA’s chief executive, Sarah Cardell, said they were not satisfied with evidence from supermarkets, so will be calling them for ‘formal interviews to get to the bottom of what is going on’.

A full an final report with recommendations is set to be published by the beginning of July. 

Fuel margins have increased across the retail market, but in particular for supermarkets, over the past four years 

Competition and Markets Authority 

RAC fuel spokesman, Simon Williams, said: ‘We are very pleased to hear that the Competition and Markets Authority has confirmed what we have been saying for a long time about the biggest retailers taking more margin per litre on fuel than they have in the past.

‘Currently, the average price of diesel is more than 20p a litre overpriced simply because they refuse to cut their prices.’

The AA also said that the CMA’s update confirms the belief among millions of UK drivers that they get a raw deal at the pump.

‘Since the pandemic, competition between forecourts has too often and in too many places been non-existent,’ the AA’s president, Edmund King, said.

‘The current diesel price scandal and the fiver-a-tank cost difference between neighbouring communities are just two examples. 

‘More recently, a handful of maverick small forecourts slashing prices, saying they can still stay commercially viable, has exposed the shame of the other retailers.’

It comes as a garage owner is claiming the crown of ‘King of the Pumps’ because he believes he is selling the cheapest fuel available anywhere in Britain.

Vijay Jaganathan is advertising both petrol and diesel at 129.9p per litre at his rural forecourt – compared to the UK average of 145p for petrol and 154p for diesel.