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UK fuel prices rise by highest margin since February 2022

Fuel prices
Fuel prices

Filling the tank of a 55-litre family car, such as a Skoda Superb, costs nearly £90 for diesel, says the RAC

Prices of petrol and diesel increased for the second month in a row in February, suffering the largest rise since Russia’s invasion of Ukraine back in February 2022.

According to figures from RAC Fuel Watch, petrol prices increased by 4p per litre to 144.76ppl, which means the cost of a full tank of an average 55-litre family car now stands at £79.62 - £2 higher than in January.

Diesel, meanwhile, increased by 5ppl to 153.22ppl, making for an £84.27 bill for drivers of an average family car - a rise of £2.60 month on month.

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The RAC claims the price increases have been a result of rising oil prices, with the cost of a barrel surpassing $80 (£63.28) on 8 February meaning retailers had to pay more for fuel, passing on the price rise to customers.

Last month, the RAC also claimed prices were impacted by Houthi rebel attacks on cargo ships in the Red Sea, which was forcing route changes and subsequent delays.

Drivers in Northern Ireland are supposedly getting better prices than those in the rest of the UK, with diesel coming in 4.6ppl cheaper at 148.62ppl and petrol coming in 5.6ppl cheaper at 139.19ppl.

The RAC described the discrepancy as “galling”, with retailers across the Irish Sea willing to sell fuel to drivers at cheaper rates.

“Our data shows that in February, drivers have endured some of the biggest monthly average fuel price increases since the year 2000,” said Simon Williams, fuel spokesperson for the RAC.

“Diesel’s 4.7p rise was the 14th largest and the 4p that went on to petrol was the 17th biggest increase since the start of the century.”

It’s claimed that many retailers are taking a margin of around 10ppl on both petrol and diesel, with supermarkets taking up to 8ppl.

There was also an 18p difference between the cheapest and costliest supermarket petrol prices and a 21p difference for diesel.

“When analysing the supermarkets’ prices via the Competition and Markets Authority open data scheme, it's also very clear there are some big differences between the cheapest and most expensive prices charged for both petrol and diesel,” Williams said.

“To put this into context, it means the cost of filling a family-sized car can be up to £10 more expensive in one part of the country than another. It’s important to remember this is the very same product being charged at vastly different prices based just on location.”

The Petrol Retailers Association (PRA), meanwhile, has called for action in tomorrow’s Spring Budget, described by the organisation’s boss Gordon Balmer as “a pivotal moment for addressing the pressing concerns facing petrol retailers across the UK”.

In a statement sent to Autocar, the PRA called for an extension to the fuel duty freeze, claiming removing the measure would result in “potentially aggravating the financial strain on consumers already grappling with volatile global energy prices”.

“Fuel duty has long been a key concern, providing relief to motorists amidst escalating living costs. Temporary cuts and freezes have been welcome, offering relief amidst economic uncertainty,” said Balmer in the statement.

He added that more support should be given to retailers, because of uncertainty caused by the standard business rate multiplier.

“With an impending increase on the horizon, petrol retailers are experiencing increased financial pressures,” Balmer said. “The proposed rise in business rates poses will only add to the growing list of costs increases that petrol retailers have had to shoulder in recent years.”

What determines the price of fuel?

The price of petrol and diesel you buy at the pump is largely determined by the wholesale price of Brent crude oil.

Fluctuations in the price of this, however, can take weeks to filter through to the forecourts.

The price of crude oil has gone up nearly $12 per barrel since the start of July to around $96 in October and now fallen to around $78.

The long-term cost of petrol

In July 2023, a major report from the Competition and Markets Authority (CMA) found that drivers paid on average 6ppl more for fuel in 2022 as supermarkets took advantage of weakened competition and inflated pump prices.

CMA chief Sarah Cardell, who said supermarkets were usually the cheapest place to buy fuel and market anchors, said the rising of prices would have had “a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.”

The report found the rise was instigated by Asda  – which was also fined £60,000 for not co-operating fully with the CMA investigation – and Morrisons, the two cheapest fuel sellers, which last year each made the decision to target higher margins.

Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled its margin target in the same period.

Other retailers, including Sainsbury’s and Tesco, didn't respond “in the way you would expect in a competitive market” and “instead raised their prices in line with these changes”, the CMA found.

“Taken together, this indicates that competition has weakened and reinforces the need for action,” the report added.

Diesel prices were also slow to drop in 2023, partially down to Asda ‘feathering’ its prices (reducing them more slowly as wholesale prices fell) and other firms not responding competitively to that.

The CMA estimated that drivers have paid 13ppl more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.

“Competition at the pump is not working as well as it should be, and something needs to change swiftly to address this,” said Cardell.

As such, the CMA recommended a "fuel finder scheme" to give drivers access to live, station-by-station fuel prices on their phones or sat-navs. This would “help revitalise competition in the retail road fuel market.”

Cardell added: “We need to reignite competition among fuel retailers. This [scheme] would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on sat-navs and map apps.”

The CMA also recommended bringing in a new monitoring body to “hold [the] industry to account.”

On this, RAC spokesman Williams said: “The fact that drivers appear to have lost out to the tune of nearly £1 billion as a result of increased retailer margins on fuel is nothing short of astounding in a cost of living crisis and confirms what we’ve been saying for many years: that supermarkets haven’t been treating drivers fairly at the pumps.

“It’s all about action now, and we very much hope the government follows through with both of the CMA’s recommendations.

“While forcing retailers to publish pump prices is a positive step for drivers, what’s of far more significance is the creation of a fuel-monitor function within government which, we very much hope, actively monitors wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops.

“Without this, we fear drivers will continue to get a raw deal."

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