Motorists warned of rip-off fuel prices amid weak competition on forecourts

Rory Poulter & Hayley Parker
·4-min read
-Credit: (Image: Nathan Stirk/Getty Images)
-Credit: (Image: Nathan Stirk/Getty Images)


Petrol retailers, including supermarkets, are under scrutiny for allegedly overcharging drivers due to a lack of competition. The government watchdogs have accused these retailers of charging a significantly larger margin between their purchase price for fuel and the price they charge at the pumps than in previous years.

The Competition and Markets Authority (CMA) released a study earlier this year that highlighted overcharging, estimating it to be around £1.6 billion for 2023, and suggested that this trend has continued in recent months.

Historically, Asda and, to a lesser extent, Morrisons have played a role in maintaining low petrol and diesel prices by using cheap fuel as a lure to attract shoppers. This set a standard for other supermarkets, forcing them to reduce their own prices to stay competitive.

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However, the CMA has noted that Asda, in particular, has effectively stopped competing on price, resulting in drivers nationwide having to pay more.

The watchdog is urging the new Labour government to proceed with its recommendation to establish a new system called Fuel Finder. This would include a smartphone app allowing drivers to search for the cheapest fuel in their area, reports the Express. The hope is that this will stimulate competition and ensure a return to fair pricing.

The CMA disclosed in a report issued today that supermarket fuel margins have seen an increase, stating: "Supermarket fuel margins increased over the May to August 2024 period, up from 7.0 percent in April to 8.1 percent in August. They remain high on a historic basis, and overall are little-changed since the publication of our road fuel market study in July 2023."

Furthermore, the report observed a rise in non-supermarket fuel margins: "Non-supermarket fuel margins also increased over the May to August period, at 10.2 percent in August compared to 7.8 percent in April higher than the 2023 average, and also still elevated compared to historic margins."

Addressing the issue, Dan Turnbull, Senior Director of Markets at the CMA, commented: "Drivers are paying more for fuel than they should be as they continue to be squeezed by stubbornly high fuel margins. We therefore remain concerned about weak competition in the sector and the impact on pump prices."

Turnbull further remarked on governmental actions: "With that in mind, we are pleased the government is progressing with our recommendations. These measures will empower drivers to find the cheapest fuel prices wherever they are in the UK, increase competition and support the economy the more people save on fuel, the more they have to spend in other areas."

Luke Bosdet from the AA, speaking on the matter of fuel pricing, expressed discontent: "The CMA reporting that retailers continue to pump their fuel margins for extra profit will stir anger once again particularly when set against the background of the government continuing the fuel duty freeze."

Amidst a turbulent time for retailers facing higher National Insurance contributions, wage hikes and soaring energy bills, experts are scrutinising the extent of "reasonable additions" to fuel prices versus what could be considered "bloated margins". Speaking about future prospects, an industry spokesperson expressed optimism: "We believe that the Government's Fuel Finder pump price transparency scheme will eventually erode that as drivers locate and go to the cheaper forecourts, forcing rival fuel stations to lower their prices to compete. Unfortunately, it will take a year for this to come to fruition."

RAC head of policy Simon Williams commented on the ongoing issues in fuel retailing: "It's disappointing to hear that the CMA is still concerned about competition among fuel retailers, and that margins remain higher than historic levels especially after it announced this summer that drivers were overcharged by £1.6bn in 2023."

He went on to add: "We hope the introduction of the government-backed fuel finder scheme next year will succeed in driving greater competition and enable drivers all around the UK to benefit from fairer prices. In the meantime, cost-conscious drivers can download the free myRAC app and use it to find the cheapest fuel near them."

Petrol retailers hold that one reason for the increased operating margin is due to the rise in other business costs like wages. Yet, the Competition and Markets Authority (CMA) countered these claims, stating: "During our market study we found that changes in operating costs were not a driver of increases in average fuel margins for large retailers."

The Petrol Retailers Association has commented: "PRA members are committed to keeping pump prices as low as possible and operate in a highly competitive environment which is affected by a range of factors, including cost increases for retailers and geopolitical events."

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