RAC pushes for retailers to slash fuel prices amid falling wholesale costs

The RAC has issued a stark appeal to the UK's largest fuel retailers, urging them to reduce pump prices to reflect a significant drop in wholesale fuel costs.

This decline, which began in July and has accelerated in recent weeks, presents an opportunity for retailers to align prices more fairly with current market conditions.

The call comes in the wake of findings by the Competition and Markets Authority (CMA), which revealed that retailers overcharged UK drivers by £1.6 billion in 2023. The RAC argues that the recent drop in oil prices, coupled with a stronger pound, should translate into lower prices at the pump. This would not only bring relief to motorists but also help rebuild trust that has been eroded by the CMA's findings.

According to RAC Fuel Watch, the wholesale price of petrol averaged 103p per litre last week. Even with a retailer margin of 10p—2p above the long-term average—this should result in an average pump price of just under 136p per litre, which is 6p lower than the current UK average of 142p. Similarly, diesel prices should be around 139p per litre, given a wholesale price of 106p, instead of the current average of 147p.

The RAC also highlighted that the UK has had the highest diesel prices in Europe for 16 out of the last 17 weeks, despite a 5p fuel duty discount. This trend is particularly concerning given that supermarkets, which dominate fuel sales, are currently charging 138p per litre for unleaded petrol and 143p for diesel.

There are, however, examples of retailers bucking the trend. In Scotland, a newly opened EG On The Move forecourt in Portlethen recently sparked a price war with Asda by selling fuel 16p cheaper than its rival. Similarly, the Essar-branded Grindley Brook forecourt in Shropshire is offering unleaded petrol at 130.9p per litre and diesel at 133.9p, which is lower than the prices at major supermarkets.

RAC Head of Policy, Simon Williams, said: “The biggest retailers’ refusal not to reduce their prices to fairer levels is continuing to cost drivers dear, and it’s all the more outrageous when you factor in the fact we’re all meant to be benefitting from a temporary 5p cut in fuel duty, that looks likely to disappear in the coming months. While the Competition and Markets Authority has clearly stated drivers were overcharged last year, it’s blatantly apparent from our data that this problem is persisting this year.

“Once again, we urge retailers to do the right thing and reflect the lower prices they’re paying for wholesale fuel on their forecourts. It’s plain for all to see from some of the lower prices being charged around the UK, both across the whole of Northern Ireland and at various other forecourts, that fuel can and should be sold much more cheaply.

“Our analysis shows pump prices at a majority of forecourts should be cut by around 6p for both petrol and diesel. With wholesale prices down, drivers should not be seeing forecourt prices this high, especially as they are supposed to be benefitting from a 5p fuel duty cut. Our Fuel Watch data shows that this is happening as it should in Northern Ireland but, for whatever reason, it doesn’t appear to be on this side of the Irish Sea.

“Average retailer margin currently stands at 13p for petrol and a whopping 15p for diesel. This is staggering when compared to the long-term margin figures of 8p for both fuels.

“If a small individual retailer like DA Roberts at Grindley Brook in rural Shropshire is comfortable charging 131p a litre for petrol, surely the multimillion-pound businesses that are the big supermarkets ought to be able to get much nearer to that?

“If prices don’t fall dramatically in the next week or so, we believe the Government and the CMA should get all the biggest retailers together to demand an explanation. Tough action needs to be taken to change this as drivers are losing out badly every time they fill up. Artificially high pump prices also contribute to a higher level of inflation – so if prices were nearer where they should be, inflation would be lower, benefitting borrowers and the wider economy.”