- Retailers will be forced to provide up-to-date price information as part of new government scheme to call out rogue supermarkets and stations overcharging drivers at the pump.
- Motorists will be able to easily compare fuel prices in real time to choose the best prices whilst boosting competition and in turn driving down prices.
- Government action after watchdog finds some supermarkets charged drivers 6p more per litre for fuel from 2019 to 2022 – meaning £900m in extra costs across the UK in 2022 alone.
Motorists are being put in the driving seat to find the best fuel prices as the government prepares to force retailers to publicly fess up to how much they are charging at the pump.
In a win for consumers, they will be able to compare prices in real time in any area of the UK, through a new fuel price reporting scheme. Drivers will be able to easily identify those charging fair prices and those failing to pass on savings from falling wholesale costs.
The government will change the law to force retailers to comply by providing up to date price information, which is expected to lead to greater transparency and competition – in turn driving down prices and easing people’s cost of living.
The new scheme will make pricing data available for third parties – paving the way for them to create price comparison apps and websites – supporting the digital economy and helping growth.
The tough action by government follows publication of a Competitions and Markets Authority (CMA) report today showing some supermarkets charged drivers 6p more per litre for fuel. This amounts to £900m in extra costs in 2022 alone – around £75m a month.
New powers will be handed to a public organisation yet to be decided, to closely monitor the UK road fuel market, scrutinise prices and alert government if further intervention is needed.
This is the latest step in the government’s action to ease the cost of living, as part of its efforts to halve inflation this year – one of the Prime Minister’s five priorities. It follows the Chancellor’s roundtable with regulators last week, including the CMA, to ensure consumers are being treated fairly and help those struggling to make payments.
Grant Shapps, Energy Security Secretary, said: “Some fuel retailers have been using motorists as cash cows – they jacked up their prices when fuel costs rocketed but failed to pass on savings now costs have fallen.
“It cannot be right that at a time when families are struggling with rising living costs, retailers are prioritising their bottom line, putting upwards pressure on inflation and pocketing hundreds of millions of pounds at the expense of hardworking people.
“Today I’m putting into action the CMA’s recommendations and standing by consumers – we’ll shine a light on rip-off retailers to drive down prices and make sure they’re held to account by putting into law new powers to increase transparency.”
Jeremy Hunt, Chancellor of the Exchequer, said: “It isn’t fair that businesses are refusing to pass on lower prices to protect their profits while working people struggle with balancing their budgets.
“Consumers need to be treated fairly, and so we’re empowering drivers to find the best prices possible for their fuel by taking swift steps following the CMA’s recommendations.”
The CMA’s report found a concerning weakening of competition in the fuel market and an overall increase in retailers’ margins, especially in respect of diesel and with supermarkets the worst offenders (see below).
It also noted a lack of reliable and comprehensive price information available to motorists.
The report recommends the mandatory public disclosure of fuel prices and establishment of a body to monitor the market, which the government has agreed to.
The government will consult on the design of the open data scheme, and market monitoring function this autumn – with changes to the law needed to bring it in. In the interim, the CMA will create a voluntary scheme encouraging fuel retailers to share accurate, up-to-date road fuel prices for publication by August and continue to monitor fuel prices using its existing powers.
The move follows a similar scheme in Germany, which boosted competition amongst fuel retailers. Meanwhile, motorists who shopped around in Queensland, Australia, saved on average $93 per year off the back of a statewide scheme rolled out in the area.
Action to protect consumers announced today follows the government spending nearly £40 billion protecting households and businesses from spiralling energy bills over the colder months – including paying half the typical household bill and saving the average home roughly £1,500 by the end of June.
Meanwhile, with the latest Ofgem price cap coming into effect from 1 July, families will see their yearly energy bills fall by around £430 on average. On top of this, the government is also providing additional support to the most vulnerable, with an extra £150 for disabled people and £900 for those on means-tested benefits.
CMA sets out plan to help drivers get more competitive fuel prices
A new fuel finder scheme to enable drivers access to live, station-by-station fuel prices on their phones or satnavs would help revitalise competition in the retail road fuel market, the CMA said yesterday
- Increased supermarket fuel margins led to drivers paying an extra 6 pence per litre
- Instant access to prices via fuel finder scheme should drive down prices and help people find cheapest fuel
- New monitoring body needed to hold industry to account
- Asda fined £60,000 for failure to provide information when required
The scheme would be made possible by new compulsory open data requirements and backed by a new ‘fuel monitor’ oversight body. The proposals are the key recommendations by the Competition and Markets Authority (CMA) to UK government following its in-depth study into the road fuel market which found a weakening of competition in retail since 2019.
At present, retailers only provide information on prices at the petrol stations themselves. This makes it hard for drivers to compare prices and weakens competition. The fuel finder open data scheme would need statutory backing through legislation to ensure fuel retailers provide up-to-date pricing and make that available to drivers in an open and accessible format that can be easily used by third party apps such as satnavs or map apps, through a dedicated fuel finder app, or a combination of both.
The fuel monitor would monitor prices and margins on an ongoing basis and recommend further action if competition continues to weaken in the market. As the UK transitions to net-zero the demand for petrol and diesel will reduce. The fuel monitor will help us understand the impact of this on vulnerable consumers that remain dependent on petrol and diesel for longer, as well as those living in areas with limited choice of fuel stations.
The fuel monitor will ensure ongoing scrutiny of retail prices for petrol and diesel. We observed that following the interim update issued by the CMA in May 2023, the average price of road fuel fell in large parts of the UK. Over the last year, the CMA has investigated the road fuel market in detail and reached the conclusion that competition is not working well and greater transparency in pricing is needed to improve consumer confidence and bring down prices for drivers.
There is no evidence to suggest that there has been cartel behaviour taking place and the CMA has no plans to open an enforcement case.
The report found that:
- From 2019-22, average annual supermarket margins have increased by 6 pence per litre (PPL)
- Increased margins on diesel across all retailers have cost drivers an extra 13 PPL from January 2023 to the end of May 2023
- With greater transparency and shopping around as effectively as possible, the driver of a typical family car could save up to £4.50 a tank within a 5-minute drive
- Motorway service stations are charging around 20 PPL more for petrol and 15 PPL more for diesel compared to other fuel stations
Supermarkets are generally the cheapest places to buy fuel, with Asda typically the cheapest of those. This has anchored prices in the past. The CMA found that in 2022, Asda and Morrisons each made the decision to target higher margins.
Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled their margin target in the same period. Other retailers, including Sainsbury’s and Tesco, did not respond in the way you would expect in a competitive market and instead raised their prices in line with these changes. Taken together this indicates that competition has weakened and reinforces the need for action.
Diesel prices have been slow to drop in 2023, partially down to Asda ‘feathering’ (reducing pump prices more slowly as wholesale prices fell) its prices and other firms not responding competitively to that. As a result, the CMA estimates that drivers have paid 13 PPL more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.
Sarah Cardell, Chief Executive of the CMA, said: “Competition at the pump is not working as well as it should be and something needs to change swiftly to address this.
“Drivers buying fuel at supermarkets in 2022 have paid around 6 pence per litre more than they would have done otherwise, due to the four major supermarkets increasing their margins. This will have had a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.
“We need to reignite competition among fuel retailers and that means two things. It needs to be easier for drivers to compare up to date prices so retailers have to compete harder for their business.
“This is why we are recommending the UK government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time. This would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on satnavs and map apps.
“Given the importance of this market to millions of people across the UK this needs to be backed by a new fuel monitor function that will hold the industry to account. As we transition to net zero, the case for ongoing monitoring of this critical market will grow even stronger, so we stand ready to work with the UK government to implement these proposals as quickly as possible.”
Local factors also contribute to how much drivers pay at the pump. The CMA identified that there are significant price differences in local areas, and that the difference between the highest and lowest prices in local areas has increased as average fuel prices have risen.
Lower prices are typically associated with having a supermarket retailer nearby, and where there are no supermarkets, for example, in remote areas, fuel retailers are likely to have higher costs and prices are likely to be higher. The fuel finder scheme will be important to help people find the best deal possible but it is essential that the monitoring function keeps a close eye on local variations in prices.
The price premium at motorway service stations has grown in real terms since 2012, and price variation on motorways is low, due to limited competition between service stations. A fuel finder scheme would allow drivers an easy way to see where they can find cheaper fuel in the area if they come off the motorway.
The CMA has also imposed fines totalling £60,000 on Asda for failing to provide relevant information in a timely manner.
Asda received two fines, each of £30,000 (the statutory maximum), for:
- Sending a representative to attend a compulsory CMA interview who was not equipped to provide evidence on certain topics the CMA had identified in advance.
- Failing to respond completely to a compulsory written request for information.
Asda has now provided the CMA with the required information.
The final report on the Road Fuel Market Study is available to read in full.
RAC Foundation: Lack of competition pushing up pump prices
Supermarkets not as competitive as they once were
Fuel retailers have been pushing up their margins on pump prices meaning higher prices for drivers.
The latest findings from the Competition and Markets Authority (CMA) reveal that between 2019 and 2022 supermarkets pushed up their margins on petrol and diesel by 6p per litre (PPL).
The CMA also found that “increased margins on diesel across all retailers have cost drivers an extra 13 PPL from January 2023 to the end of May 2023.”
The organisation goes on to say:
“Over the last year, the CMA has investigated the road fuel market in detail and reached the conclusion that competition is not working well and greater transparency in pricing is needed to improve consumer confidence and bring down prices for drivers.”
However, the CMA could find “no evidence to suggest that there has been cartel behaviour taking place and the CMA has no plans to open an enforcement case.”
The CMA’s study on road fuel prices identified a reduction in competition amongst the supermarkets:
“Supermarkets are generally the cheapest places to buy fuel, with Asda typically the cheapest of those. This has anchored prices in the past. The CMA found that in 2022, Asda and Morrisons each made the decision to target higher margins. Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled their margin target in the same period.
“Other retailers, including Sainsbury’s and Tesco, did not respond in the way you would expect in a competitive market and instead raised their prices in line with these changes. Taken together this indicates that competition has weakened and reinforces the need for action.
“Diesel prices have been slow to drop in 2023, partially down to Asda ‘feathering’ (reducing pump prices more slowly as wholesale prices fell) its prices and other firms not responding competitively to that. As a result, the CMA estimates that drivers have paid 13 PPL more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.”
The CMA is calling for the compulsory release of price data by fuel retailers so that apps can be developed which allow drivers to check what is the best price in their local area.
It also wants to see a new monitoring body to hold the industry to account.
According to the CMA “motorway service stations are charging around 20 PPL more for petrol and 15 PPL more for diesel compared to other fuel stations.”
