Wednesday 26th Oct 2016 - Logistics Manager

High fuel prices down to tax and crude oil rises


Rises in pump prices for petrol and diesel over the last ten years have been caused largely by higher crude oil prices and increases in tax and duty – not a lack of competition, according to the Office of Fair Trading.

An OFT investigation it found that the UK has some of the cheapest road fuel prices in Europe – before tax.

In the 10 years between 2003 and 2012 pump prices increased from 76 pence per litre to 136ppl for petrol, and from 78ppl to 142ppl for diesel, caused largely by an increase of nearly 24ppl in tax and duty and 33ppl in the cost of crude oil.

Specific concerns:

* Differences in pump prices between neighbouring towns
The OFT found that petrol and diesel tend to be cheaper in local areas that have a greater number of local retailers, in particular areas where there are supermarket forecourts.

* Differences between urban and rural areas
The OFT’s analysis found that in August 2012, for example, petrol was around 1.9ppl more expensive and diesel around 1.7ppl more expensive in rural areas than in urban areas. There appear to be a number of factors which account for these differences including lower throughputs per forecourt, fewer competitors (including supermarkets) within a local area, and higher transport costs for getting fuel to rural forecourts.

* Independent dealers’ ability to compete fairly in the market
The OFT examined claims that supermarkets’ and major oil companies’ practices may be making it more difficult for independent dealers to compete with them. However, the OFT has not, to date, received evidence of any anti-competitive practices being used against independent dealers that might lead it to take enforcement action. The OFT will continue to consider any credible evidence it receives and consider taking action where practices appear to breach competition law.

* Rocket and feather pricing
The OFT investigated the perception that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops. It analysed the relationship between retail and wholesale prices at both a national and local market level, as well as the relationship between crude oil prices and wholesale prices at a national level, but found very limited evidence to support such claims.