UK Fuel Retailers Under Fire As Watchdog Flags Persistently High Profit Margins

The Competition and Markets Authority has raised concerns over continuing high profit margins on road fuel in Britain, challenging claims from fuel retailers that increased operating expenses justify the higher prices being charged at forecourts. According to the Authority’s inaugural annual monitoring report, the sustained rise in fuel margins during the past year is primarily attributable to non-supermarket retailers.

Average profit margins for supermarkets fell from 10.9 pence per litre in 2022 to 9.6 pence so far this year, yet non-supermarket operators saw margins increase to 11.1 pence per litre, compared to 10.8 pence the previous year. The Authority noted that if operating costs were genuinely impacting retailers’ profitability, declining or flat profit margins would be expected. Instead, profitability remains robust.

Fuel prices remain a central concern for millions of drivers, particularly during the peak travel season. The average petrol price stood at 135 pence per litre between last November and this October, down 8 pence per litre from a year earlier. Diesel also averaged 142 pence per litre, a decrease of 8 pence over the same period. Despite these drops, profit margins remain high, suggesting competitive forces are insufficient to drive down prices faster.

The introduction of the government’s fuel finder scheme aims to increase transparency by allowing motorists to compare real-time fuel prices through apps and websites. The Authority suggests this could empower consumers and stimulate more effective competition in the market.

Motoring groups have highlighted the prevalence of “rocket and feather” pricing, where retail prices escalate rapidly when input costs rise but fall more slowly when costs decline. A spokesperson for the AA motorist organisation described this as a long-standing problem for UK drivers, particularly problematic during periods of heavy road usage, such as the festive season. The RAC echoed these views, expressing hope that increased scrutiny and new digital comparison tools will lead to more competitive prices across the country.

The Petrol Retailers’ Association countered the findings, arguing that headline margins do not reflect significant cost pressures, including labour, energy, taxation, and crime. However, the Authority’s report maintains that rising operating costs have not eroded profitability, and that current retail pump prices remain materially below the peaks recorded in 2022 and 2023, aligned with falls in wholesale prices.