An interim monitoring report by the Competition and Market Authority (CMA), released on Monday, found that fuel margins were similar to the high levels seen during its road fuel market study – a review of the market to understand the factors influencing fuel prices undertaken between 2022 and 2023.
“While there are several factors contributing to the higher fuel prices seen in recent months, fuel margins remain stuck at high levels which impacts prices paid by drivers at the pump,” Dan Turnbull, senior director of markets at the CMA, said.
“The ‘fuel finder’ scheme set to launch this year should be a game changer for drivers – allowing them to find the cheapest fuel prices while boosting competition between fuel retailers.”
Fuel prices increased for both petrol and diesel from October 2024 to February 2025. The CMA said these movements reflect in part changing crude oil prices and refining spreads, both of which are driven by global factors.
The average petrol and diesel prices at the end of February were 139.6 and 146.8 pence per litre (ppl) respectively. This represents an increase of 5.2 ppl and 7.1 ppl in petrol and diesel prices than the previous four months.
Supermarket fuel margins decreased from 8.6 per cent in September 2024 to 8.2 per cent in November 2024 before peaking at 8.9 per cent in December 2024. Non-supermarket fuel margins decreased from 10.6 per cent in September 2024 to 9.1 per cent in November 2024 before rising to 9.8 per cent in December 2024.
Fuel margins remain high compared to historic levels, which suggests that overall competition in the road fuel retail market remains weak, the regulator noted.
The CMA also looked at the retail spread – the average price that drivers pay at the pump compared to the benchmarked price that retailers buy fuel at – over October 2024 to February 2025.
Petrol retail spreads in the four months to end-February averaged 13.8ppl, which was 1.1ppl lower than over the previous four-month period – but still more than double the average of 6.5ppl over 2015 to 2019. Diesel retail spreads averaged 13.4ppl, which was 2.9ppl lower than the previous four-month period, but still more than the average of 8.6ppl in 2015 to 2019.
While spread analysis can give a quick overview of trends in the sector, it is a less reliable indicator of competitive intensity than individual retailers’ fuel margins. Retail spreads increase and decrease in response to the volatility of wholesale prices but should return to a normal range over time.
Responding to the report, Gordon Balmer executive director of the Petrol Retailers Association said it is “disappointing” that the report does not properly account for the increased fixed costs that petrol retailers have to contend with.
“The omission of the increases in business rates, energy costs, national insurance and national minimum wage leaves us reading a report that does not give the full picture of the retail fuel market,” Balmer said.
“Many of these increased costs have come from the government policy. It is not reasonable to massively increase the costs associated with running a forecourt and then ignore them in an analysis of the sector.”
At the end of its road fuel market study, the CMA recommended a new monitoring function and fuel finder scheme. The previous government accepted those recommendations and determined the CMA would take on the new statutory monitoring function. The new government has since confirmed its commitment to both these measures.
The fuel monitoring function will provide ongoing scrutiny of prices to encourage effective competition between retailers and help keep prices low for drivers. While yesterday’s update was based on data provided voluntarily by fuel retailers, the next update will include data gathered using CMA’s new information gathering powers.
The ‘fuel finder’ scheme will allow drivers to compare real-time fuel prices, via navigation apps, in-car devices and comparison websites. The government’s aim is to launch the scheme by the end of this year, subject to legislation and parliamentary time.
