It’s a frustrating case of déjà vu for petrol retailers, particularly the independents, who have again been accused of failing to pass on reduced fuel prices to drivers.
According to the AA’s latest Fuel Price Report, petrol costs paid by retailers have plummeted 8p per litre since the end of September – after pump prices peaked at 157.12p per litre at the start of the month.
But forecourt retailers aren’t measuring up, according to the motoring association, with pump prices dropping by an insignificant 1p per litre.
Penalising the retailers is easy, though. AA spokesman Luke Bosdet told The Telegraph: “This can only be described as greed. The fuel trade is dragging its feet on passing its wholesale savings on to customers.”
But as ever, it’s not a simple tale, and placing all forecourt retailers under the old ‘profiteering umbrella’ is simply unfair.
Independent forecourts operate on ‘razor-thin’ margins
Oil companies and large supermarket chains have better fuel supply arrangements than independents – especially compared with small and single-site operators.
They have the power to buy fuel on a longer price lag that could last three weeks, which means the price generated at the time of purchase is protected for that period. A small, independent retailer is however likely buying on a daily or weekly price lag.
That applies additional pressure when the market is volatile, such as now, with cuts to Saudi Arabian crude oil production and increasing instability in the Middle East. This puts pressure on fuel prices, leaving independents more exposed to changing costs in the market.
The fact indies already operate on “razor-thin margins”, as the Petrol Retailers Association executive director Gordon Balmer says, doesn’t help.
When margins are further hampered by minimum wage increases, rising energy costs, and record high inflation, it becomes “very difficult” to operate a site without at least a 10p margin on fuel, as one retailer says. Especially when they don’t have the economies of scale to finance endless investment in repairs, maintenance and licences like supermarkets and oil companies do.
A surge in forecourt crime is also burning a hole in retailers’ pockets. Recent data by Forecourt Eye showed a rising trend of drive-offs or customers who have no means to pay, with six incidents occurring per site each month on average. Independents can’t absorb such unexpected, and often criminal, costs like a major player can.
Greater commercial deals on fuel than independent operators
That’s why the Competition & Markets Authority’s fuel finding scheme – which will make fuel price reporting by individual stations a statutory requirement – is also causing independents concern, because it will point drivers to cheaper petrol stations. That, of course, is one of the points of the scheme, but indies can’t compete on price like the big players.
It will of course put the heat on supermarkets and oil companies to keep pump prices competitive, but that means nothing to smaller businesses that can’t be as agile, and face volume erosion as a result.
That said, some are managing to undercut rivals by passing on pump price savings faster. A Rontec site in Bridgend, for example, is charging 144.9p a litre for petrol, while a Motor Fuel Group forecourt in Dewsbury is just 147.9p a litre for petrol, according to the AA Fuel Price Report.
But even these larger independents will have greater commercial deals due to the scale of their businesses, with MFG and Rontec collectively consisting of over 1,000 petrol stations. For many small or single-site operators, this won’t be possible.
There’s a rocky road ahead for these retailers, and additional profiteering accusations will add fuel to the fire and further risk their businesses. It’s easy to point the finger and claim profiteering, but the reality isn’t that simple.
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