The UK road fuel sector is “working well” and the rise in petrol and diesel prices have been caused by higher crude oil prices and increases in tax – not a lack of competition.
New evidence from the Office of Fair Trading (OFT) suggests competition is working “relatively effectively” at a national level and that the UK has some of the cheapest prices in Europe before tax but are amongst the most expensive after tax.
The news follows the widespread mistrust in the UK road fuel sector and concerns that pump prices rise quickly when the wholesale price of crude oil goes up but falls more slowly when it drops. The OFT launched an investigation last September to see whether there are competition problems that it could address to improve the way the sector functions.
It found in the 10 years between 2003 and 2012, prices paid at UK pumps increased by 79% – from 76pence per litre (ppl) to 136ppl – for petrol and by 82% – from 78ppl to 142ppl – for diesel. These increases were caused by a 24ppl increase in tax and duty and a 33ppl rise in the cost of crude oil. It also suggests a key feature of the road fuels sector has been the “growing influence” of the big four supermarkets. They increased their share of road fuel sold in the UK from 29% in 2004 to 39% last year.
Clive Maxwell, OFT Chief Executive, said: “We recognise that there has been widespread mistrust in how this market is operating… Our call for information has not identified any evidence of anti-competitive behaviour in the fuel market at a national level where competition appears to be strong. There may be some issues at a local level. Where we receive evidence of potential anti-competitive behaviour we will consider taking action.”
The report also found fuel is significantly higher at motorway service stations. Although the difference in prices may be caused by higher costs with running motorways, the OFT said it is concerned that drivers are not available to view prices until they have pulled into the service station. It is therefore calling on the Department for Transport to consider introducing new road signs that would display service station petrol and diesel prices for motorway drivers.
The UK road fuel sector was estimated to be worth £47 billion in 2011, with road fuels making up 4.5% of the average UK households’ weekly spending.