Fuel market working well, says OFT

The OFT found 'very limited evidence' that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops

The OFT found 'very limited evidence' that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops

First published in National News © by

Competition is "working well" in the UK road fuel market and rises in pump prices over the past decade are largely due to increases in tax and the cost of crude oil, the Office of Fair Trading (OFT) has reported.

It found "very limited evidence" that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops.

The OFT said its investigation into the market did identify a lack of pricing information on motorways as a concern and did not rule out taking action in some local markets if there was "persuasive evidence of anti-competitive behaviour".

The OFT launched a call for information on the UK road fuel sector in September last year to determine whether there were competition problems that need to be addressed before investigating concerns over the prices charged for petrol and diesel at the pumps.

Campaigners had called for the watchdog to announce a full investigation into the sector, saying there needs to be greater scrutiny. But the OFT said that the UK had some of the cheapest pre-tax road fuel prices in Europe, noting that in the 10 years to 2012 pump prices increased from 76 pence per litre (ppl) to 136ppl for petrol, and from 78ppl to 142ppl for diesel, caused largely by an increase of nearly 24ppl in tax and duty and 33ppl in the cost of crude oil.

It said a key feature of the sector over the past decade had been the growing influence of the big four supermarkets, which had increased their share of road fuel sold in the UK from 29% in 2004 to 39% in 2012, and with the ability to sell at cheaper prices.

It recognised that many independent dealers had found it difficult to compete in the sector, with the overall number of UK forecourts falling from 10,867 in 2004 to 8,677 in 2012. It also reported that it had not received evidence of any anti-competitive practices being used against independent dealers that might lead it to take enforcement action.

Its analysis of the relationship between retail and wholesale prices at both a national and local market level, as well as the relationship between crude oil prices and wholesale prices at a national level, turned up "very limited" evidence to support claims of so-called rocket and feather pricing.

AA president Edmund King said: "The OFT sees the fuel pricing market as competitive but this clashes with drivers' frustration on the forecourts. If fuel pricing is fair and competitive, there is no reason not to publish petrol and diesel wholesale prices to prove the point and reassure motorists."

A Downing Street spokeswoman said: "It is for the OFT to look at this issue and they have done. They have made it very clear that if there is any further evidence they will look into it and take action. But on this latest issue, DECC (the Department of Energy and Climate Change) are looking at the OFT's response."

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