Supermarkets under further scrutiny as watchdog finds they have hiked up fuel margins

The competition watchdog is intensifying its scrutiny of supermarkets amidst concerns over rising fuel prices.

The Competition and Markets Authority (CMA) suspects that weakened competition may be part of the reason behind fuel price increases on supermarket petrol station forecourts.

The CMA provided an update on the Road Fuel market study initiated last year.

While the majority of fuel price hikes can be attributed to global events like the Russian invasion of Ukraine, the authority suspects that a portion of the price increases may be due to weakened competition in the road fuel retail market.

Evidence compiled by the CMA suggests that fuel margins, particularly in supermarkets, have risen over the past four years.

This has led to average 2022 supermarket pump prices being approximately 5 pence per litre more expensive than they would have been if margins had stayed at 2019 levels.

Although supermarkets generally offer the cheapest fuel, at least one supermarket has significantly increased its internal forward-looking margin targets over this period, a shift that may have influenced pricing behaviour across the sector, the CMA has said.

The watchdog also noticed possible signs of weaker competition in the diesel market compared to petrol since the beginning of 2023.

While fluctuations in diesel retail margin are expected due to volatility in diesel wholesale prices, the sustained high margins this year have raised concerns.

The level of cooperation with the CMA’s study has varied among supermarkets, with some failing to provide sufficient evidence.

Given the importance of this market to millions of drivers, the CMA said it is determined to uncover the facts behind these price hikes.

Formal interviews with supermarket senior management have been planned to delve deeper into these issues.

Sarah Cardell, Chief Executive of the CMA, expressed her concerns over the rising cost of living, stating that the CMA aims to ensure competition helps contain these pressures as much as possible.

She said: “The rising cost of living is putting people and businesses under sustained financial pressure.”

“The CMA is determined to do what it can to ensure competition helps contain these pressures as much as possible.”

“Our Road Fuel market study is nearly complete. 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 at the pumps.”

“We are also concerned about the sustained higher margins on diesel compared to petrol we have seen this year.”

“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.”

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

RAC fuel spokesman Simon Williams said: “We are very pleased to hear that the Competition and Markets Authority has confirmed what we have been saying for a long time about the biggest retailers taking more margin per litre on fuel than they have in the past.”

“Currently, the average price of diesel is more than 20p a litre overpriced simply because they refuse to cut their prices.”

“The wholesale price of diesel is actually 4p lower than petrol, yet across the country it is being sold for 9p a litre more – 154.31p compared to 144.95p for unleaded.”

“Something badly needs to change to give drivers who depend on their vehicles every day a fair deal at the pumps. We hope even better news will be forthcoming later this summer.”