Following this morning’s report by the Competition and Markets
Authority*, Jack Cousens, the AA’s head of roads policy responds:
“Pump-price competition in the UK is broken. A month of major
wholesale price falls without a penny coming off the average pump
price of petrol is testament to that.
“It is very welcome and timely that the Competition and Markets
Authority probe into road fuel pricing has agreed with the AA
that there is a need for further investigation.
“However, the AA argues that the problem is not the gap between
the oil price and wholesale price feeding through to the
forecourts but the length of time it takes for that wholesale
price to be reflected at the pump. The fuel trade has no trouble
in passing on rising costs to the customer but lags badly in
passing on savings. It has been labelled ‘rocket and feather’
pricing, and it exists.
“Pre-pandemic, UK fuel pricing had settled into a rhythm where
significant wholesale price reductions would start to be passed
on in a matter of days by ‘cost-cutter’ supermarkets. That would
then trigger other supermarkets and fuel retailers to start
bringing down theirs, or find themselves at a competitive
disadvantage.
“That didn’t mean that oil company forecourts couldn’t cut their
prices sooner. However, most of them just sat back waiting for
the supermarkets to make the first move.
“That trigger appears to have gone, and now there is a need to
find another way to re-invigorate pump-price competition. The AA
therefore welcomes the CMA’s suggestion of more pump price
transparency immediately, something the UK’s biggest motoring
organisation has been calling for years.”
Evidence of failure to pass lower fuel costs on to hard-pressed
drivers and their families has shown itself twice this year – on
both occasions with a possible fuel duty cut looming.
Ahead of the Chancellor’s 5p fuel duty cut on 23 March, wholesale
prices had been falling. Yet it took weeks for the tax cut to be
reflected in the UK price averages.
Last week, after wholesale petrol since the Jubilee bank holiday
fell 5p a litre by mid June and is now 10p lower, a new fuel duty
cut has been talked about.
Three solutions to the UK’s pump-price woes have been offered: a
road fuel regulator, a tax cut and greater transparency to
stimulate competition.
A regulator would be helpful as an independent arbiter of fair
prices. It is hugely ironic that OFGEM, with electric vehicle
(EV) charging costs as part of its remit, has already drafted
policies for protecting the EV consumer.
However, it would take time to create a road fuel regulator and,
given the current cost of living crisis, a quicker solution is
needed.
Further fuel duty cuts would also help, but the AA asks why
public money that could support the NHS, councils and other
cash-stricken areas should be diverted when the equivalent of
another 5p cut in fuel duty, and more, has already been slashed
from costs heading to the pump. The fuel trade can’t expect to
use tax revenue to prop up its profits.
The AA has called for the revival of George Osborne’s Fuel Price
Stabiliser. Essentially, that lowers fuel duty when oil and
commodity fuel prices surge and raises it when they slump. The
previous threshold was set at $75 a barrel for oil.
That too would be a longer-term project but essential with
current global economic instability.
What is needed now is a faster solution that could be set up in
weeks, and Northern Ireland’s Fuel Price Checker provides that.
It is proven, tested and hugely popular, and is ‘oven-ready’ for
expansion across the UK at relatively low cost.
The Checker (https://www.consumercouncil.org.uk/fuelpricechecker/tool)
provides the sort of pump price transparency that not only
compares the average price of petrol and diesel between towns but
also highlights the potential lowest cost of each fuel within a
town or city.
That has a two-fold benefit. Firstly, for those commuting or
driving between towns, the Checker indicates the cheapest place
for refuelling. That allows consumers to counter the pump-price
postcode lottery currently plaguing many communities.
Secondly, within the communities themselves, drivers will be able
to gauge the extent to which their local fuel retailer is being
competitive. They may then be drawn to the cheapest forecourt or
others offering similar prices, or know what they are currently
paying is a good price.
ends
NOTES TO EDITORS
* https://www.gov.uk/government/news/review-finds-cause-for-concern-in-some-parts-of-road-fuel-market
