Reduced competition and increased supermarket profit margins led to drivers paying an extra 6p per liter for fuel last year.
And increased profits on diesel prices, vital to the road haulage industry, have cost drivers an extra 13p per liter between January and May.
Asda and Morrisons have taken “a less aggressive approach to pricing” since 2019, according to a report into forecourt pump prices by the UK’s competition watchdog.
Both companies have, in the past, driven competition by acting as price leaders selling the cheapest petrol to attract customers forcing others to lower prices to match them.
However, an investigation found that they have increased their profit margins by charging higher prices and not reducing them as quickly when oil prices – cited as the main reason for expensive fuel costs – came down. Rival supermarkets, including Tesco and Sainsbury’s, followed similar pricing patterns.
Sarah Cardell, chief executive of the watchdog – the Competition and Market’s Authority – said competition on petrol station forecourts “was not working as well as it should” and called for reforms.
The CMA estimated that the financial impact of the 6p per liter increase in average supermarket fuel margin from 2019 to 2022 resulted in a combined additional cost of around £900m for customers of the four supermarket fuel retailers in 2022 alone. This is equivalent to approximately £75m a month for this period.
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The CMA said it was also concerned that “variable pricing” patterns in local areas meant consumers in parts of the country are paying “significantly more” for fuel than others. And it slated weak price competition at motorway services where it found prices were around 20p per liter more for petrol and 15p more for diesel compared to other fuel outlets.
It called for the setting up of an open data fuel finder scheme, which would let customers better check the price of fuel in their area, after a similar scheme was successfully piloted in Northern Ireland.
The CMA has also proposed that a new “fuel monitor” oversight body be set up to probe prices and margins “on an ongoing basis and recommend further action if competition continues to weaken in the market”.
It pointed out that the average price of fuel fell in large parts of the UK after it published interim reports on the issue on three occasions.
The CMA said it fined Asda £60,000 for failing to co-operate fully with its investigation. The two fines of £30,000 – the maximum permitted – were for failing to respond completely to a compulsory written request for information and then sending a representative to attend a compulsory CMA interview “who was not equipped to provide evidence on certain topics the CMA had identified in advance.”
Asda has been approached for comment.
Ms Cardell said: “Competition at the pump is not working as well as it should be and something needs to change swiftly to address this. This will have had a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.
“We need to reignite competition among fuel retailers and that means two things. It needs to be easier for drivers to compare up to date prices so retailers have to compete harder for their business. This is why we are recommending the UK Government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time.
“This would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on satnavs and map apps.
“Given the importance of this market to millions of people across the UK, this needs to be backed by a new fuel monitor function that will hold the industry to account. As we transition to net zero, the case for ongoing monitoring of this critical market will grow even stronger, so we stand ready to work with the UK Government to implement these proposals as quickly as possible.”
The RAC welcomed the findings. Its fuel spokesperson Simon Williams said: “This is a landmark day when it comes to fuel prices in the UK. The fact that drivers appear to have lost out to the tune of nearly £1bn as a result of increased retailer margins on fuel is nothing short of astounding in a cost of living crisis and confirms what we’ve been saying for many years – that supermarkets haven’t been treating drivers fairly at the pumps.
“It’s all about action now and we very much hope the government follows through with both of the CMA’s recommendations.
“While forcing retailers to publish pump prices is a positive step for drivers, what’s of far more significance is the creation of a fuel monitor function within government which, we very much hope, actively monitors wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops. Without this, we fear drivers will continue to get a raw deal.”
Asda said: “The CMA’s comprehensive road fuel market review recognized Asda as the price leader and confirmed the presence of an Asda petrol station in a local area keeps prices down for all motorists. Despite record inflation, we have carefully managed our business to ensure Asda was the cheapest traditional supermarket for both groceries and fuel throughout the period reviewed by the CMA and this position is unchanged.
“The penalty notices relate to two individual alleged technical breaches in the way information was shared with the CMA over a 12-month period, during which time a significant number of documents were shared with the CMA to aid their study and we engaged fully with their enquiries. As the price leader in the supermarket fuel sector, we welcome any initiative that makes it easier for motorists to compare fuel prices, such as an app or other technology-based solutions.”
