CMA review finds fuel prices not falling fast enough

A review of the rising cost of fuel in the UK has found evidence that retailers engaged in “rocket and feather” pricing during 2022.

The Competition and Markets Authority (CMA) said fuel prices rose in line with increased wholesale costs, but fell more slowly when those were reduced.

This was especially evident for diesel: a significant proportion of Europe’s supply typically comes from Russia, so its wholesale price rose disproportionately (compared with petrol) during 2022.

The watchdog observed that, during 2022, 80% of a wholesale price change translated to the pump within six weeks, but increases were more quickly passed on to motorists than decreases.

These findings coincided with an increase in retailers’ profits, said the CMA. However, it noted that further investigation is required to determine whether this was linked to the “rocket and feather” pricing, or whether it was coincidental.

The CMA added that it did not find evidence of rocket and feather pricing before 2022.

However, the RAC disagrees with this aspect of the CMA’s findings. Fuel spokesman Simon Williams said: “Volatility has unquestionably been an issue in fuel pricing since Russia invaded Ukraine, but when wholesale prices trend down for weeks at a time, drivers should see pump prices do the same at a similar rate. Unfortunately, our data shows that this is not often the case.

"What’s happening now – as it was last December – is a massive downward shift in the price of wholesale fuel with a slow dropping of forecourt prices. Consequently, drivers are set for a more expensive time on the roads this Christmas than [they] should be.

“The wholesale price of petrol has fallen from 130p a litre at the beginning of October to 109p yesterday – a drop of 21p. Meanwhile, the average price of unleaded at the end of October peaked at 166.88p but has to date only fallen 8p to 158.91p. Even accounting for the accepted lag for cheaper wholesale prices to filter through to forecourts, this is too slow, particularly as the biggest retailers buy new stock so often.

“The situation with diesel is even worse as it has plummeted by 33p over the same period but the average retail price has only come down by 8.4p from 191.12p to 182.71p yesterday.

“We strongly urge the biggest retailers to lower their prices. Unfortunately, we fear they are holding out, hoping for a rise in the price of oil later this month.”

This year has been the most volatile on record for fuel prices. They rose a record 50p per litre between January and July, the CMA said.

Meanwhile, the difference in price between petrol and diesel grew to a record 24p per litre.