He tasked the CMA to discover if the 5p fuel duty cut announced in the Spring Budget is being passed onto drivers, and the cause for the rapid rise in the cost of diesel and petrol for customers.
Today, the CMA reported that after the review of competition in the road fuel market, there is cause for concern in the growing gap between the price of crude oil when it enters refineries, and the wholesale price when it leaves refineries as petrol or diesel – also known as ‘refining spread’.
The report also found that the main drivers for fuel prices are that the ‘refining spread’ tripled in the last year, growing from 10p to nearly 35p per litre. Also, the difference between the wholesale price and the price charged to motorists has fluctuated but remained about 10p per litre on average.
On the whole the fuel duty cut appears to have been implemented, with the largest fuel retailers doing so immediately and others more gradually.
Following today’s announcement, the CMA has today launched a full market study in order to discover the complete state of the road fuel market in the UK. An interim update will be published in the autumn this year.
The CMA was also asked by the Business Secretary to suggest possible new measures to increase the transparency of the industry for consumers.
Sarah Cardell, CMA General Counsel, said: “The recent rises in pump prices are a major worry for millions of drivers. While there is no escaping the global pressures pushing up fuel prices, the growing gap between the oil price, and the wholesale price of petrol and diesel, is a cause for concern. We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it.
“That’s why we are immediately launching a market study that will use our formal legal powers to investigate this in more depth. If evidence emerges of collusion or similar wrongdoing, we won’t hesitate to take action.”
In response, RAC fuel spokesman Simon Williams said: “We welcome the CMA’s report and the commitment to a fuller market review. We are particularly pleased to see that the CMA acknowledges the gap between wholesale and retail prices has been widening in recent weeks.
“Regardless of the reasons for wholesale prices being what they are we continue to believe there is clear evidence, not least in the last week, that major retailers are incredibly slow to pass on falling wholesale costs, yet quick to pass on rising ones. The idea of allowing drivers to more easily compare pump prices near them may also prove beneficial.
“The question drivers may have, however, is how long the review will take and – crucially – when they might see a change to what they pay every time they fill up. As each day goes by and the cost-of-living crisis is felt ever more keenly, the need for retailers – especially the largest ones – to reflect wholesale prices fairly becomes ever more urgent.
“We urge the Government to ensure it’s in a position to scrutinise the relationship between wholesale and retail prices. And where issues are found, it must be able to take action that quickly leads to fairer prices.”
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