Petrol retailers could be fined if they fail to pass on fuel duty cuts to customers, warned the Competition and Markets Authority (CMA).
The watchdog argued affordable fuel is “essential to consumers and businesses across the UK”, and that it was monitoring the behaviour of fuel vendors.
It confirmed it would step in and “take action” if there was evidence consumer protection law has been broken in the retail market.
Andrea Coscelli, CMA chief executive, said: “If sufficient evidence emerges that the fuel tax cut has not been passed on to consumers, this would be an indication that competition is not working well in this market. In that case we would consider launching a formal investigation, which could ultimately lead to fines or legally binding commitments from companies to change their behaviour.”
The comments follow Business Secretary Kwasi Kwarteng writing to petrol retailers earlier this week, urging them to pass on fuel duty cuts to consumers.
Chancellor Rishi Sunak announced a 5p fuel duty cut in the Spring Statement two months ago to ease pressures on motorists.
Prices spiked to record levels at UK forecourts on Tuesday – with unleaded petrol prices climbing to 167.64p per litre, while diesel prices rose to 180.88p per litre – powered by historically high oil and gas prices.
This means that to top up a 55-litre tank for a typical family car, it would cost £92.20 to fill it with petrol now costs £92.20 and £99.50 for diesel.
The development has exacerbated the cost of living crisis fuelled by spiralling inflation, with food and energy prices also at near-record levels.
Motoring groups slam retailers as cost-of-living crisis deepens
Motoring groups RAC and the AA have both suggested retailers have not passed on fuel duty cuts to consumers.
RAC fuel spokesperson Simon Williams explained: “RAC analysis of fuel margins shows retailers – for whatever reason – are taking on average 2p a litre more than they were before the Chancellor’s 5p duty cut. The average margin for petrol is currently 11p a litre and for diesel 8p whereas in the month leading up to the duty cut it was 9p for petrol and 6p for diesel. To put this into perspective the long-term average margin for unleaded is 7.5p and for diesel 8p.”
Luke Bosdet, AA Public Affairs correspondent added: “Forecourts, like other retailers, have been hit by minimum wage increases, higher National Insurance contributions, the lifting of the electricity price cap and higher local taxes. But, had they passed on the full tax cut and some of the lower costs, perhaps drivers would still be contemplating record pump prices not about to be hit by them.”
In response, the Petrol Retailers Association told City A.M. that the figures “do not tell the full story” and retailers’ margins were “often not enough to cover operating costs.”
Comparing pump prices to wholesale prices was not enough for a “comprehensive analysis,” which would take account of how much oil companies charge for fuel storage and delivery, card interchange costs, and development fuel costs.
The industry body’s boss Gordon Balmer called for a further reduction of fuel duty as rising oil prices had “effectively cancelled out” the discount.
Andrew Opie, a director at the British Retail Consortium, said. “While retailers were quick to pass on the Chancellor’s fuel duty cut, such measures are limited at a time when prices continue to climb, Retailers understand the cost pressures facing motorists and will do everything they can to offer the best value-for-money across petrol and diesel forecourts, particularly if the price of oil falls.”
Meanwhile, a separate study from the AA has revealed Big Four supermarkets are offering petrol at lower rates than many oil company brands.
The Big Four includes Asda, Tesco, Sainsburys and Morrisons.
The AA revealed petrol prices were, on average, 4.7p per litre cheaper for petrol and 4.6p per litre cheaper for diesel at supermarket.