CMA publishes first monitoring report on road fuel market
The CMA’s first monitoring report on road fuel shows that prices at the pump have gone up by over 11 pence per litre while the wider data gathered on margins and spreads shows a mixed picture.
- Prices up by at least 11 pence per litre since May
- Fuel margins of supermarkets fall over summer
- Autumn increases in retail fuel spreads a cause for concern if it continues
In July 2023 the Competition and Markets Authority (CMA) recommended a monitoring body be established to report on the state of the road fuel market as a part of proposals to revitalise competition in the road fuel market. The UK government accepted the recommendation, which the CMA is putting into action on an interim basis, and without compulsory information gathering powers, while the scheme awaits formal legislation. The CMA is today publishing the first report and will publish further reports on a quarterly basis.
Fuel prices
The CMA looked at fuel prices at the pump for drivers from the end of May 2023 to the end of October 2023.
Overall, while pump prices for both petrol and diesel have increased 11.1 pence per litre (ppl) for petrol and 13.9ppl for diesel since May 2023, this can be divided into 2 separate periods. During June, July and August, this appears to have been driven by global factors such as increased crude oil prices. Wholesale prices then reduced in September and October while retail prices did not. While it is too early to draw definitive conclusions, this could indicate a lack of competitive response from fuel retailers if this trend continues. The CMA will monitor these developments.
For petrol, prices have increased from 142.9ppl at the end of May 2023 to 154.0ppl at the end of October 2023. For diesel, pump prices at the end of May stood at 147.9ppl and had increased to 161.8ppl by the end of October.
Fuel margins
The CMA looked at the fuel margins of supermarkets – the difference between what a supermarket pays for its fuel and what it sells at – from the start of 2023 up to August 2023. The data shows that the fuel margins of supermarkets reduced over the period June – August. Margin data is not yet available for September and October and relies on voluntary information sharing by the retailers. Noting the trend in pump prices for September and October, the CMA will report on related margin trends in the next update.
In the period from May to August, average fuel margins fell around 4.5ppl (from an average of 11.9ppl in May compared to 7.3ppl in August). Nonetheless, August margins remain higher than those for any year prior to 2021.
Spreads
The CMA also looked at the retail spread – the average price that drivers pay at the pump compared to the benchmarked price that retailers buy fuel at – from the end of May 2023 to the end of October 2023.
While spread analysis can give a quick overview of trends in the sector, it is a less reliable indicator of competitive intensity than individual retailers fuel margins. This is because spread analysis is based on an industry-level average price and an industry benchmark price, from which individual retailers will differ in their sale and purchase price.
During September and October, the CMA observed significant increases in retail spread for both petrol and diesel. In both cases, the retail spread at the end of October was significantly higher than the long-term average of 5-10ppl. While it is expected that the retail spread will increase and decrease in response to volatility in wholesale prices, over time pump prices should track wholesale prices if retail competition is effective. If retail spreads were to remain at these levels for much longer, this would cause concern about the intensity of retail competition in the sector.
Data collection
For these update reports, the CMA issued requests for information to: Applegreen – Petrogas, Asda, Bp, Esso, Euro Garages Ltd, Morrisons, Motor Fuel Group, Moto-Way, Rontec, Sainsburys, Shell, Tesco and Welcome Break.
The CMA received responses from: Applegreen – Petrogas, Asda, Bp, Esso, Euro Garages Ltd, Morrisons, Motor Fuel Group, Rontec, Sainsburys, Tesco and Welcome Break.
Given that 2 retailers (Shell and Moto-Way) did not respond, this has limited the analysis that we are able to do in this report. In particular, the CMA has been unable to provide fuel margin analysis for the non-supermarkets, as it does not have a dataset that is comparable to what it was able to assemble during its market study, using its statutory information-gathering powers.
Sarah Cardell, Chief Executive of the CMA, said:
Drivers are feeling the pain again as petrol prices at the pump have been on the rise since June. The underlying data shows a mixed picture in terms of what is driving this. Over the summer we saw rising wholesale costs, but more recent trends give cause for concern that competition is still not working well in this market to hold down pump prices. We will be monitoring and reporting further on this in our next update.
As our year-long, in-depth study showed, this is a market where competition is not working as well as it should. But while today’s first monitoring report is an important step, it is based on voluntary information and is missing some major fuel retailers. That’s why it is so important that a permanent fuel monitor – with powers to demand information from all retailers – is put in place to give a fuller picture of how the market is working.
Temporary pricing data scheme
Separately, the temporary pricing data scheme set up by the CMA now has 12 retailers participating, representing approximately 40% of UK forecourts and more than 60% of fuel sold. The data is used by third parties such as petrolprices.com and the AA, providing pricing information in an open, transparent manner. The UK government has committed to legislating for a mandatory, real-time pricing data scheme and will consult on it later this year.
Supermarkets remain, on average, cheaper than other types of retailer, generally maintaining an average pricing gap of around 4-6ppl between supermarkets and other retailers since 2017.
For more information, visit the road fuel monitoring case page.
Notes to editors
- At the end of its road fuel market study, the CMA recommended a new fuel finder scheme and a fuel monitor in the UK. The UK government accepted those recommendations.
- The UK government has committed to legislating for a mandatory, real-time pricing data scheme and will consult on it later this year.
- All enquiries from journalists should be directed to the CMA press office by email on press@cma.gov.uk or by phone on 020 3738 6460.