Fuel prices too high

But the motoring organisation also claims that the Government’s 5p cut in duty, brought in shortly after Russia’s invasion of Ukraine last year, is not benefitting drivers. They believe retailers are using it to increase their margins.

War on the motorist

RAC’s analysis shows that despite oil trading around $90 a barrel and sterling only being worth $1.20, the delivered wholesale price of petrol averaged just over 113p last week. It means that the UK average price of unleaded standing at 155.33p is delivering a retailer margin over 16p a litre before VAT is applied.

This is in stark contrast to the long-term average of 7p a litre. It is also far higher the 10p margin that smaller, independent retailers argue is now fair due to inflation.

Diesel, which is currently averaging 162p across the country, is overpriced by around 4p a litre, it added.

Last week, a litre of wholesale diesel averaged 123p meaning average retailer margin is around 12p, compared to the 8p long-term figure tracked by the RAC since 2012.

An investigation by the Competition and Markets Authority in the summer concluded the big four supermarkets had overcharged drivers by 6p a litre in 2022. This total up to nearly £900 million of extra profit.

RAC fuel spokesman Simon Williams said their analysis shows that despite the investigation, “nothing has changed.

“Drivers are still losing out massively when wholesale prices come down.”

 Live and direct

The investigation recommended that retailers should publish live prices to allow customers to compare different providers. This has begun to take place, especially amongst big retailers and supermarkets, but prices remain high. There is not any news as to when a pump price watchdog may be set up.

Williams believes that “drivers and, indeed, the Treasury should be furious” about the price and profit margins, especially considering the VAT cut and the cost of living crisis.

“There is no doubt from studying RAC Fuel Watch data that margins are up across the board, and while retailers argue their costs have increased due to inflation, the irony remains that there is a definite link between pump prices and consumer price inflation.

“A failure to cut pump prices to fairer levels when there is a clear opportunity to do so has the effect of keeping inflation artificially high – which is clearly in nobody’s interest.”

RAC data shows the big four supermarkets’ margin on petrol has been around 14p in October compared to an average of 7p so far this year, which is more than double the 3.4p for the whole of 2019.

“We badly need the Government to set up the price monitoring body recommended by the CMA and for it to carry powers to take action against big retailers that don’t reflect downward movements in the wholesale market such as we’ve been experiencing in the last six weeks,” said Williams.

“We have informed the Treasury that its 5p duty cut isn’t helping drivers as intended and we’re now calling on the big four supermarkets, which lead the retail market by virtue of the fact they sell around half of all the fuel bought by drivers, to explain their steadfast refusal to cut prices to fairer levels.

“Sadly, we know this is highly unlikely to happen and instead, at best, we’ll get another banal statement from the British Retail Consortium while independent retailers will feel the need to defend themselves, despite us recognising that this isn’t a problem of their making.”

Fuel price trends