Retailers making ‘shocking’ profits on petrol prices despite drop in wholesale costs

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In particular the RAC said chains such as Asda, Sainsbury’s, Tesco and Morrisons should have reduced prices in recent weeks, but instead increased them “unnecessarily”

Filling up your tank will cost a lot more from midnight

Some of the UK’s biggest petrol retailers have been accused of pushing prices up at a time when wholesale prices are falling.

Motoring body the RAC said chains such as supermarkets are putting prices up, despite the cost of oil dropping by around £7.50 a barrel last week.

Instead, retailers added on average another 3.1p to a litre of unleaded petrol and 2.7p to diesel in November.

The RAC said larger retailers were making a “shocking” profit.

In particular, it said the Big Four chains such as Asda, Sainsbury’s, Tesco and Morrisons should have reduced prices, but had instead increased them “unnecessarily”.

The RAC accused chains of increasing prices at a time when oil prices are dropping
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Fuel expert Simon Williams said: “Sadly, our data shows all too clearly that drivers are being taken for a ride by retailers at the moment.

We can’t see any justification for the prices that are being charged at the pumps and are concerned that drivers on lower incomes who depend on their vehicles are being priced off the road altogether,” he said.

“The wholesale petrol price, which is what retailers pay to buy new supply, dropped by 10p from mid-November, so we can’t see how any increase – let alone a 3p one – was warranted.”

Williams added that customers are at the mercy of big chains who won’t cut prices until one rival makes the first move.

“There’s also a clear argument that competition in fuel retailing isn’t working, a fact demonstrated by no one publicly defending their refusal to lower pump prices.

“There appears to be no desire among the big four retailers, which dominate fuel sales, to lower their prices to entice customers to store.

“If a major brand were to cut its prices tomorrow, you can guarantee that within hours the others would do the same. It would be much fairer if retailers mirrored wholesale prices more closely on a daily or weekly basis.”

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“The government should ask the biggest retailers to explain why they’re charging such high prices for fuel when wholesale prices have dropped,” Mr Williams added.

A government spokesperson said: “Fuel prices are increasing in countries across the world and this is not an issue unique to the UK.

“We’ve provided £4.2bn of support to help people with the cost of living, including effectively cutting taxes for workers on Universal Credit, providing £500m of targeted support for the most vulnerable families and freezing fuel duty for the twelfth year in a row.”

Analysis by the RAC found that despite wholesale costs having fallen by 7p from the middle of the month, retailers continued to put prices up, with the average cost of a litre of unleaded petrol ending the month at 147.28p and diesel up to 150.64p.

Prices for both fuels peaked at record highs on 20 November and 21 November respectively – diesel reaching 151.1p per litre and petrol at 147.72p.

On Thursday, the AA said that the UK’s average petrol prices started to show the first “significant fall” since November 2020.

The average price of a litre of petrol and diesel has fallen by nearly half a penny in recent days, it said, but added the costs should have been passed on to consumers sooner.

Luke Bosdet, the AA’s fuel price spokesman, said: “It’s just taken so much longer than has happened over recent years.”

Mr Bosdet said retailers usually hold their prices until supermarkets “seize the initiative” and make cuts, but that did not happened in this instance.

“Without that initial kick, pump prices have stagnated and that is a potentially worrying development if it sets the pattern for the future,” he warned.

The Petrol Retailers Association (PRA), which represents around two thirds of the UK’s forecourts, said retailers have to factor in other costs before they can lower prices.

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“Electricity prices, business rates, labour costs have all risen and these need to be paid for if your local petrol station is to remain in business,” said Gordon Balmer, executive director of the PRA.

He added that fuel retailers have been hit by the “double whammy” of reduced sales and rising costs.

“Our members continually monitor prices to ensure that they remain competitive with their industry counterparts and continue to provide good value for money.”

The British Retail Consortium said: “Supermarkets are keen to provide their customers with the best value for petrol through their forecourts, offering the cheapest petrol in the country.

“Supermarkets work hard to pass on changes in wholesale prices to relieve pressure on consumers, though prices at the pump will be influenced by various forces, including tax, oil prices and operational costs.”

Asda, Sainsbury’s, Tesco and Morrisons have been approached for comment.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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