Office of Fair Trading investigates UK’s £32bn petrol industry
By Martin Beckford, Home Affairs Editor
10:30PM BST 05 Sep 2012
The Office of Fair Trading said it would look at whether or not falls in the cost of crude oil are being passed on to drivers at the pumps, who are paying near-record prices.
It will also consider if supermarkets and major petrol retailers are keeping independents out of the market, which is worth £32billion a year.
And the OFT will probe widespread claims that prices are higher at forecourts in rural areas where competition is even more scarce.
Its review comes after a 38 per cent rise in the price of petrol for motorists between June 2007 and June this year, and a 43 per cent increase in diesel costs over the same five-year period.
Petrol reached a record high of 142.5p a litre in April after threatened strikes by tanker drivers led to panic-buying made worse by ministers suggesting that motorists should hoard fuel in jerry cans.
George Osborne, the Chancellor, is under pressure to scrap plans for a duty increase in January that has already been deferred.
Claire Hart, Director in the OFT’s Services, Infrastructure and Public Markets Group, said: “We are keenly aware of continuing widespread concern about the pump price of petrol and diesel and we have heard a number of different claims about how the market is operating.
“We have therefore decided to take a broad based look at this sector, to provide an opportunity for people to share their concerns and evidence with us. This will help us determine whether claims about competition problems are well-founded and whether any further action is warranted.”
The OFT said it would spend six weeks gathering evidence from the industry and consumer groups before publishing a report in the new year.
Its investigation, which mirrors others in Germany, Spain and Australia, was prompted by a complaint from the Retail Motor Industry Federation, a trade body, that independents could not compete in Britain’s fuel market.
The OFT’s move was described as “overdue” by the AA and was welcomed by the Government as well as campaigners.
A Department for Transport spokesman said: “We welcome the OFT’s decision.
“Many motorists are concerned about fuel prices and that when crude oil prices fall, this isn’t seen at the pump as quickly as consumers would like.
“We look forward with interest to the findings of the study.”
Quentin Willson, the former Top Gear presenter and FairFuelUK campaigner, said: “There is a widespread feeling that when oil goes up, pump prices rocket immediately – but when the oil price falls, pump prices don’t reflect that fall. This causes a sense of complete exasperation and anger.”
Prof Stephen Glaister of the RAC Foundation said: “We have always argued for pricing transparency and this review promises to provide it. There has long been a suspicion amongst drivers that pump prices are much quicker to rise than fall. Now at last we should get a definitive answer on how the market works.
“We also welcome scrutiny of what the rapid decline in the number of petrol stations has meant for fuel supply and price. In 1990 there were some 18,000 forecourts. Now there are fewer than 9,000.”
David Cameron’s official spokesman said: “Clearly, the OFT is independent and this is a matter for them.
“But if they think that there are problems in the way these markets are functioning and that is having an adverse effect on consumers, then they need to investigate.”
Shell, which has about 900 service stations in the UK, said: “When there is a significant move in the wholesale fuel price, we endeavour to respond quickly in passing this on to our customers.
“However, there is a lag between changes in the crude oil price and the pump price due to the refining process in which crude oil is converted into fuel for our cars.
“So the petrol you buy today was potentially bought as crude many weeks previously. Other factors such as exchange rates and the cost of additives will also affect the pump price.
“It’s also important for consumers to know that only one third of the pump price reflects the wholesale price of fuel. Of every £1 motorists spend on fuel, more than 60p is tax.”