Downing Street has agreed to set up a fuel price watching system after the competition watchdog found supermarkets had increased their profit margin by six pence per litre.
In its final report on the road fuel market study, the Competition and Markets Authority (CMA) said competition among fuel retailers has not been working well. It recommended a fuel finder scheme so drivers can have instant access to prices, and a monitoring body to police fuel prices.
Prime Minister Rishi Sunak’s spokesman said Downing Street supports “all of the findings from the CMA report,” promising new legislation to force retailers to provide up-to-date price information.
The report found that drivers typically had to pay an extra 20 pence for a litre of petrol and 15 pence more for a litre of diesel at motorway service stations compared to other retailers.
It also found that all retailers have charged diesel vehicle drivers an extra 13 pence per litre, while average annual supermarket margins for petrol have increased by six pence per litre between 2019 to 2022.
According to the study, Asda appeared to be one of the price leaders among supermarkets, where drivers can find cheapest fuel.
Asda, which was “typically the cheapest” among supermarkets, decided to increase its profit margins in 2022. In 2023, its fuel margin target has more than tripled the target in 2019, while Morrisons had doubled its margin target in the same period.
However, other supermarkets didn’t try to compete with them by keep their prices low, but instead raised their prices in line with these changes.
The CMA said it indicates that “indicates that competition has weakened and reinforces the need for action.”
After wholesale diesel price fell in 2023, Asda was also slow to drop retail prices, charging drivers and extra 13 pence per litre from January to May, the CMA found.
But the watchdog said there is no evidence to suggest there had been cartel behaviour, or collusion among sellers to keep prices high.
Sarah Cardell, chief executive of the CMA, said increased profit margins by supermarkets had “a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.”
The watchdog recommended the government legislate for a new fuel finder scheme which would make it compulsory for retailers to make their prices available in real time so that drivers can access them via satellite navigation or map apps.
She also said the scheme needs to be backed by a monitor that “will hold the industry to account.”
The CMA said it had fined Asda £60,000 for its failure to provide information when required.
A spokesman for Asda said the fine was related to “two individual alleged technical breaches in the way information was shared with the CMA over a 12-month period, during which time a significant number of documents were shared with the CMA to aid their study and we engaged fulsomely with their inquiries.”
In response to the CMS’s market report, the spokesman said the report “recognised Asda as the price leader and confirmed the presence of an Asda petrol station in a local area keeps prices down for all motorists.
“Despite record inflation, we have carefully managed our business to ensure Asda was the cheapest traditional supermarket for both groceries and fuel throughout the period reviewed by the CMA and this position is unchanged,” he said.
“As the price leader in the supermarket fuel sector, we welcome any initiative that makes it easier for motorists to compare fuel prices, such as an app or other technology-based solutions.”
Sunak’s spokesperson said Downing Street will launch a consultation in the autumn on plans to set up a price watch scheme and give powers to a public organisation to monitor the prices, and that the CMA will set up a voluntary scheme in the mean time.
Howard Cox, founder of the FairFuelUK Campaign, who has long campaigned for a price regulator, said he’s “absolutely delighted” that the CMA recommended his “long called for pump pricing regulator #pumpwatch to be implemented.”
