Gap between oil price and wholesale fuel price a "cause for concern"

A review of competition in the road fuel market has found 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.

The review, which was requested by Business Secretary Kwasi Kwarteng last month, found that as well as the rrising cost of crude oil, there is a growing gap between the crude oil price and the wholesale price of petrol and diesel – the so-called ‘refining spread’. The ‘refining spread’ tripled in the last year, growing from 10p to nearly 35p per litre.
    
Over the same period, the so-called ‘retailer spread’ (the difference between the wholesale price and the price charged to motorists) 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. It was also found that there are significant differences in price between many rural and urban areas.

In light of some of the concerns found and the urgency of the situation, the Competition and Markets Authority (CMA) has launched a market study that will examine the road fuel market in more depth, making full use of its compulsory information gathering powers. An interim update will be published in the autumn.

The CMA was also asked by the UK government to advise on possible measures “to increase the transparency that consumers have over retail prices”. The review sets out how an open data scheme could help consumers more easily access and compare local pump price information, and create new commercial opportunities for tech developers. There may also be merit in providing more information about pump prices on motorways.

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.

"On the whole the retail market does seem to be competitive, but there are some areas that warrant further investigation. These include finding out whether the disparities in price between urban and rural areas are justified.

"This area of work is a major priority for the CMA and if we can help, we will. 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."