It is, says the RAC, “a landmark day when it comes to fuel prices in the UK”. 

For years (and years) the way petrol and diesel prices have been set, including the notorious ‘rocket and feather’ effect, has been a dark art, with huge variations from one seeming street to the next, even with the same retailer. 

Now, the Competition & Markets Authority is recommending, on the back of a report into fuel prices published today, that retailers are forced to publish pump prices in every single forecourt.

“Of far more significance”, however, says the RAC, “is the creation of a fuel monitor function within government” which will “actively monitor wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops”.  

The CMA’s report had found ”a weakening of competition in retail since 2019” – in other words long before Asda was eyed up by Mohsin and Zuber Issa and the EG Group, or Clayton Dubillier & Rice took a shine to Morrisons, let alone the Covid-19 pandemic or the lorry driver shortages of 2021 or Russia’s invasion of Ukraine in 2022. 

“As a result of increased retailer margins on fuel”, said RAC fuel spokesman Simon Williams, “drivers appear to have lost out to the tune of nearly £1bn, which is nothing short of astounding in a cost-of-living crisis and confirms what we’ve been saying for many years: that supermarkets haven’t been treating drivers fairly at the pumps.”

So the prospect of access for motorists to live, station-by-station fuel prices on their phones or satnavs, to revitalise competition in the retail road fuel market, is seismic. As CMA CEO Sarah Cardell says: “It needs to be easier for drivers to compare up-to-date prices so retailers have to compete harder for their business.”

The findings don’t look good for the supermarkets, either in terms of optics, or for that matter profits. Having previously treated fuel as something of a loss leader to drive traffic to its supermarkets, a small but discernible increase has been used to compete against the discounters, while a further marked differential between petrol and diesel prices has been observed since the Ukraine-Russia war 

But there are a number of unanswered questions. 

1. How quickly can this happen? 

The proposed fuel finder scheme needs statutory backing through legislation to be able to monitor prices and margins on an ongoing basis, and to be in an accessible format that can be easily used by third party apps such as satnavs or map apps. That will take time. And then there’s the technology. It’s true that an even more vast scheme was brought to life in short order in the form of the notorious NHS Covid app, at a cost of £37bn. But the government’s record on technology isn’t the best.

It’s a job normally left to price comparison sites but because of the nature of fuel prices – how they are posted and where (i.e. at the forecourt itself rather than online) – it requires the government, or rather the “fuel monitor oversight body” that needs to be established – to pull together prices from over 8,000 forecourts. Every week. 

“It’s all about action now,” says the RAC. But while supermarkets have taken steps to reduce the aforementioned differential between diesel and petrol prices since the CMA’s investigation into fuel prices was announced in May, it’s going to take a while for the CMA’s words to turn into any further form of meaningful action. And there is bound to be heel dragging until then because, make no mistake, while supermarkets welcomed the suggestion of more transparent pricing, this move is going to have a major impact on prices, with motorists able to vote with their feet in a way that was only previously possible with groceries. Which takes us onto a second point

2. Will any supermarket offer national fuel pricing?

All the supermarkets have national pricing policies for food and drink, with only tiny and occasional localised variation. In contrast fuel prices are routinely variable, based on factors that few understand, including local competition of course but also obscure measures like the distance that oil tankers have to travel (apparently). 

With greater transparency (and the reputational damage that supermarkets may suffer as a result of the CMA’s report) comes the possibility that a retailer will operate a national fuel pricing policy. It’s true that may not allow a retailer to respond to a particular local competitor, but in rebuilding trust, it’s also possible that a supermarket (or supermarkets) choose to change and promote their consistency of offer for motorists. 

3. What happens to independent forecourt retailers?

The fuel finder price comparison scheme has clearly been set up for the supermarkets and no doubt oil majors will have to comply and supply prices too. But what about independent forecourt retailers? This cohort has always struggled to remain competitive against the supermarkets due to different fuel supply arrangements. That was particularly apparent soon after the Ukraine-Russia war, when unprecedented increases in pump prices meant independents bore the brunt of profiteering accusations, after not passing the government’s 5p per litre cut in fuel duty through to forecourt prices.

As Ascona Group CEO Darren Briggs once pointed out: “The majority of big supermarkets buy their petrol and diesel on a three-weekly lag, which means the petrol and diesel they are retailing today has been bought at a cost price generated over three weeks ago. In a fast-rising market, supermarkets have a huge competitive advantage over the independent fuel retailer, where around 75% buy their petrol and diesel on a previous week lag – not three weeks.”

It’s not clear if independent forecourt retailers will be required to supply their prices, from our reading of the report, let alone whether they have the resource to do so. So the CMA’s scheme may, in fact, pose a further threat to independent retailers, given potentially heightened usage of the fuel finder app.

Instead of being in the spotlight for their potentially competitive prices, motorists could simply be unaware of prices at these independents. 

And the fortunes of motorway service station forecourts is also in the balance. As the CMA says: ”A fuel finder scheme would allow drivers an easy way to see where they can find cheaper fuel in the area if they come off the motorway.” 

 

When Asda acquired EG Group UK&I last month CEO Mohsin Issa vowed that all EG forecourts would switch to the Asda fascia and would lower prices to reflect that. But how that applies to its motorway service station forecourts is not so clear. Certainly those motorway service stations have thrived through charging the premium prices of 20ppl and 15ppl on petrol and diesel respectively on average that the CMA report observes. And as it also highlights, those premiums have accelerated significantly since 2012. 

One thing is for sure: the brakes have now been applied to petrol and diesel prices by the CMA report. Now we need to work out when this plays out. And how. 

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