The Competition and Markets Authority (CMA) said higher pump prices cannot be attributed solely to factors outside the control of the retailers, even though the majority of fuel price increases are due to global factors, such as the Russian invasion of Ukraine.
Providing an update on the road fuel market study it began last year, the watchdog said the higher prices drivers are paying at the pumps appear in part to reflect some weakening of competition in the road fuel retail market.
“Our Road Fuel market study is nearly complete. Although much of the pressure on pump prices is down to global factors including Russia’s invasion of Ukraine, we have found evidence that suggests weakening retail competition is contributing to higher prices for drivers at the pumps,” Sarah Cardell, chief executive of the CMA, said.
“We are also concerned about the sustained higher margins on diesel compared to petrol we have seen this year.”
The CMA said it will conduct evidence sessions with the supermarkets as the regulator found their response inadequate.
“We are not satisfied that all the supermarkets have been sufficiently forthcoming with the evidence they have provided in our road fuel market study, so we will be calling them in for formal interviews to get to the bottom of what is going on,” Cardell said, adding that the CMA expects to publish a full and final report, including recommendations for action, by the beginning of July.
Evidence gathered by the CMA indicates that fuel margins have increased across the retail market, but in particular for supermarkets, over the past four years. 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 the evidence from internal documents indicates that at least one supermarket has significantly increased its internal forward-looking margin targets over this period. Other supermarkets have recognised this change in approach and may have adjusted their pricing behaviour accordingly, the agency added.
The CMA said it is also concerned that it may be seeing evidence of weaker competition in diesel, as compared with petrol, since the beginning of 2023. While some degree of variation in diesel retail margin is to be expected given the high levels of volatility in diesel wholesale prices, the high margins in 2023 appear to have gone on longer than would be expected. The CMA will be exploring whether weaker competition is part of the explanation for this.
Expressing dissatisfaction over the supermarkets’ approach to the evidence-sharing, the CMA revealed that important information has only been received late in the day and after several rounds of information gathering. The CMA will now conduct formal interviews with the supermarkets’ senior management.
