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Drivers Paying Too Much for Fuel Due to High Retail Margins, Says CMA

November 28, 2024

UK drivers are paying more for fuel due to high retail margins, says the CMA. Learn how weakened competition affects pump prices and what measures are being taken to help motorists save.

The Competition and Markets Authority (CMA) has reported that UK drivers are still paying more for fuel than they should because of “stubbornly high” retail margins.

The watchdog expressed concerns over weakened competition in the fuel sector, leading to inflated prices at the pump.

According to the CMA, fuel margins remain higher than historical levels. Supermarket fuel margins increased from 7% in April to 8.1% in August, while non-supermarket fuel margins rose from 7.8% to 10.2% during the same period. The sustained increase suggests that competition in the road fuel retail market remains weak.

Dan Turnbull, Senior Director of Markets at the CMA, stated: “While fuel prices have fallen since July, 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.

“With that in mind, we are pleased the government is progressing with our recommendations. These measures will empower drivers to find the cheapest fuel 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.”

The CMA noted that fuel prices fell from June to October, driven by global factors such as crude oil costs. Average petrol and diesel prices at the end of October were 134.4p and 139.7p per litre, respectively—a decrease of 10.0p and 10.4p.

However, the retail spread—the difference between the price drivers pay at the pump and the benchmark price retailers pay for fuel—remains above the long-term average of 5p to 10p per litre. From July to October, petrol averaged 14.9p per litre above the benchmark, while diesel averaged 16.3p per litre. This indicates a continued lack of competition in the sector since retail spreads have remained elevated since 2020.

Simon Williams, Head of Policy at the RAC, commented: “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 £1.6 billion in 2023.

“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.”

The CMA’s concerns come as drivers continue to feel the pinch of higher living costs. The upcoming fuel-finder scheme, supported by the government, aims to increase transparency in fuel pricing and promote competition among retailers, ultimately benefiting consumers.