UK drivers are being overcharged at the pumps as petrol and diesel prices fail to reflect falls in the global oil market, according to the country’s consumer watchdog.
Fuel retailers have argued that they are unable to cut pump prices in line with declining oil costs because they need to offset higher non-fuel operating expenses, including wages and energy bills. However, a new analysis by the Competition and Markets Authority has dismissed that explanation.
The CMA found that while fuel retailers continue to make strong profit margins compared with historical levels, their operating margins are also elevated, undermining claims that higher costs justify current prices.
Dan Turnbull, senior director of markets at the CMA, said fuel margins remain “at persistently high levels” and that the watchdog’s latest analysis shows operating costs do not explain this. He added that the findings indicate competition in the sector is weak, noting that if it were working properly, drivers would be seeing lower prices at the pump.
Motoring organisations said the report confirms what drivers have long suspected. The RAC said the CMA had clearly rejected the justification put forward by petrol retailers, while the AA pointed to a sharp fall in wholesale fuel costs that has not been passed on to consumers.
The AA said the wholesale cost of petrol paid by retailers has “crashed by more than 7p a litre” since the end of November. With VAT included, it said that should translate into a saving of 8.4p a litre, or about £4.60 on a full tank. Instead, the average petrol price at the pump has fallen by just two-thirds of a penny.
An AA spokesperson described this as classic “rocket and feather” pricing, where pump prices rise quickly when fuel markets increase but fall far more slowly when wholesale costs drop, calling it the bane of UK drivers.
The CMA first warned in September that it was deeply concerned about potential overcharging by fuel retailers but said at the time it had not yet completed a detailed assessment of how operating costs were affecting businesses.
In its latest report, published on Monday, the watchdog said average fuel prices have fallen over the past year, largely due to lower crude oil prices, exchange rates and refining costs. Petrol prices averaged 135p per litre and diesel 142p per litre, both around 8p lower than a year earlier.
However, the CMA found that although prices declined between November 2024 and October this year, they did not fall as much as they could have. Non-supermarket fuel retailers, in particular, were found to be holding on to historically high fuel profit margins.
To increase transparency and competition, the CMA confirmed it will launch a fuel finder scheme next year. The initiative will allow drivers to compare fuel prices in real time, including via satellite navigation apps and price comparison websites.
Turnbull said fuel costs remain a major concern for households, especially at this time of year when millions of people are travelling across the country. He said the fuel finder scheme will be crucial in putting power back into the hands of motorists and helping families save money.
The Guardian said it approached the Retail Motor Industry Federation for comment.
