Fuel giant firms should reduce petrol prices by 5p per litre to reflect lower costs at the wholesale level, according to the RAC. The UK’s major petrol retailers would still make substantial profit margins even after the cut, said the motoring organisation, adding that drivers had yet to see the benefits of last year’s 5p duty decrease brought in by the government. As we noted earlier this week, the RAC argues that petrol prices have failed to reflect the lower wholesale costs, with supermarkets’ margins in particular increasing recently to an average of 16p per litre for unleaded fuel and 12p per litre for diesel. Asda claims its prices are around 4p per litre cheaper than the national average; Tesco, Sainsbury and Morrisons have not commented on the call for a price cut.
Oil prices rose following Russia’s invasion of Ukraine with Brent crude hitting over $120 a barrel in June 2014. Since then, prices dropped to just above $70 in March 2015. They have risen back to around $90 in recent months. However, wholesale oil prices are still lower than they were last summer which is why the RAC is summing these retailers’ price as unfair. Despite the level of current oil prices, the current wholesale price per barrel is almost $20 less than it was this time last year.
A recent investigation by the Competition and Markets Authority (CMA) highlighted that increased profit margins cancelled out the benefit of the 5p fuel duty cut announced by Chancellor of the Exchequer George Osborne last year. The CMA suggested that weak competition has resulted in supermarket margins on fuel increasing, which in turn has led to higher costs for drivers. As a result, retailers agreed to set up a scheme to enable drivers to compare live fuel prices online in order to prevent further public outrcry.
The RAC suggested that this comparison would illustrate greater price differences in Northern Ireland where superstores do not control fuel retailing. There, unleaded petrol costs an average of 150p per litre and diesel an average of 157p per litre, 5p less than the UK average.
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