Watchdog says fuel prices can’t be blamed on supply chain pressures alone

16 May 2023

The Competition and Markets Authority (CMA) has said increases in fuel prices cannot be blamed entirely on global supply chain pressures following Russia’s war on Ukraine. 

Based on evidence gathered as part of its Road Fuel market study, the CMA said higher prices are being driven in part due to a “weakening of competition” among supermarkets. 

It said price increases at supermarket petrol stations “cannot be attributed solely to factors outside the control of the retailers”, meaning customers may be over-paying for fuel. It also stated concerns about sustained higher margins on diesel compared with petrol.

The watchdog viewed internal documents from one supermarket which showed it had “significantly increased its internal forward-looking margin targets” in 2022, which may have caused rival supermarkets to raise their prices too. 

CMA chief executive Sarah Cardell said: “Although much of the pressure on pump prices is down to global factors, including Russia’s invasion of Ukraine, we have found evidence that suggests weakening retail competition is contributing to higher prices for drivers.”

The CMA added that supermarket engagement was poor and many had not been “sufficiently forthcoming,” claiming important information was provided late into the investigation after several rounds of data gathering.

Cardell continued: “We are not satisfied that all the supermarkets have been sufficiently forthcoming with the evidence they have provided in our Road Fuel market study, so we will be calling them in for formal interviews to get to the bottom of what is going on.”

She added: “It is a priority for the CMA to publish a full and final report, including recommendations for action, by the beginning of July.”

The probe into supermarket fuel prices comes as part of a series of measures by the CMA to assess the cost of living crisis, including an investigation into high food prices.

So far, the food analysis segment has found no evidence that retailers are unnecessarily raising prices, but the CMA said it plans to “step up” its investigation amid questions over profiteering. 

“While global factors have also been the main driver of grocery price increases, it is important to be sure that weak competition is not adding to the problems,” Cardell said. 

She added: “Given ongoing concerns about high prices, we are announcing the stepping up of our work in the grocery sector to understand whether any failure in competition is contributing to grocery prices being higher than they would be in a well-functioning market.”

It will involve assessing how competition is operating in the grocery market, and identifying certain product categories for closer examination across the supply chain.

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