The Great Fuel Rip-Off Could Be Coming To An End

Credits: Krzysztof Hepner/ Unsplash
  • One alternative that has been proposed is a fuel regulator, christened “PumpWatch” by Howard Cox, founder of campaign group FairFuelUK. 
  • Fuel prices are still high, while motorists are being squeezed elsewhere by the cost of living crisis. 
  • While a price checker reports data and lets economic gravity do the rest, PumpWatch would do its own calculations and settle on an “acceptable” price.

Price checker under consideration to boost competition and cut costs at the pump. Last year was a torrid time for drivers, with fuel prices reaching all-time highs in the most volatile year since records began.

High fuel prices

Some of this was caused by Russia’s invasion of Ukraine in February, which decimated imports and pushed inflation into the double digits. 

But some of the blame can be pinned on retailers as well, as a preliminary investigation by the Competition and Markets Authority (CMA) found.

In December, the watchdog reported that “rocket and feather” pricing had started to take hold last year – where prices surge upwards as the wholesale cost rises but drop slowly when it falls. 

The investigation is incomplete, and the CMA’s tone was fairly measured. Other experts have been less guarded, accusing retailers of “rampant exploitation” and “chronic profiteering”.

Price checker

For those who were not put off driving for life, the outlook for 2023 is more optimistic. There are signs of a tectonic shift in the industry after the Government confirmed it was looking into a fuel price checker, along the lines of European models, to stimulate competition and cut costs. Luke Bosdet, the AA’s fuel spokesman, believes it could be a “transformational year”.

A price checker will not be unfamiliar to some readers: one was set up in Northern Ireland in 2020 by its Consumer Council. 

It divides the country into 82 sites, displaying the lowest, highest and average prices in each. Drivers are encouraged to seek out better deals, pressuring forecourts to lower their prices, and reducing local disparities – or so goes the theory.

Different fuel prices

According to data from Forecourt Trader, a litre of unleaded in Northern Ireland is about 3p to 8p cheaper than any other part of the UK. Diesel costs about 4p and 10p less. 

While there are regional differences to take into account when comparing fuel prices, Richard Williams, of the Consumer Council, argues that greater transparency “can only help”.

Sunlight, as they say, is the best disinfectant.

“There’s nothing more guaranteed to send a driver livid than knowing that the pump price of fuel is significantly lower somewhere else,” Bosdet says. 

“When you’re looking at supermarket essentials – milk, bread, eggs, that sort of thing – they’re pretty much the same price regardless of where you buy them in the UK. But for fuel it’s not: you have this lottery on price depending on where you live.”

Further fuel market analysis

The Government, emboldened by the CMA, has committed to “further work and analysis” to decide if a British price checker would work. 

At the same time, the watchdog is continuing its investigation into the fuel market. Its findings may not be published until July, but the preliminary report noted some disturbing trends. 

For one thing, the gap between wholesale and retail prices widened between 2017 and 2021: 2p to 3p on a litre of diesel, and 3p to 4p on petrol.

Motoring organisations have been monitoring what they believe are nonsensical prices thrown up by the market. 

A couple of weekends ago, the AA spotted a 13p difference in petrol prices between Ashton-under-Lyne and Rochdale – which are just 12 miles apart. 

Some city forecourts with higher sales somehow charge vastly more than those in sparsely populated rural areas.

So could the Northern Ireland model be exported wholesale to Britain? Williams has no reason to think otherwise. “I don’t really see why it shouldn’t be done,” he says. 

“It’s relatively low-cost. Obviously you have an awful lot more forecourts to cover and it’s a much bigger geographical area, so it might want to be done on a regional basis.” 

But could it be genuinely revolutionary, as some suggest?

Fuel regulator

Not everyone is convinced. One alternative that has been proposed is a fuel regulator, christened “PumpWatch” by Howard Cox, founder of campaign group FairFuelUK. 

It has attracted the support of dozens of MPs, including the former energy secretary Andrea Leadsom, who called on Chancellor Jeremy Hunt to set up the watchdog last month.

Simon Williams, of the RAC, is critical of Northern Ireland’s fuel price checker, which is updated weekly and does not publish the prices of specific forecourts.

“One issue that often leads to widely varying prices locally… is the fact that major retailers operate regional pricing which can mean much higher prices where there is little or no competition,” he says. 

“But perhaps the biggest issue of all is that pump prices don’t always mirror movements on the wholesale market, particularly when the latter is coming down.”

He is more open to the German system, which sets out data from specific forecourts. In 2019, a study from the think tank RWI Essen from 2019 concluded that it had reduced fuel prices by up to two cents a litre.

Fuel prices variations

Richard Williams hits back against the claim that significant variations exist locally – although he concedes there are disparities when comparing across the whole of Northern Ireland. 

“The price checker has produced more transparency and given the opportunity for people to see the prices in their region and shop around,” he argues.

“One petrol station in somewhere like Coleraine, if they know that somewhere closer has got lower prices, they might change their prices. So there is competition within localities.” 

The tracker bears this out: in each of the sites, the difference between the lowest and highest prices is rarely more than a few pence.

Cross-border competition with the Republic of Ireland has surely depressed fuel prices, but not everyone believes it is this simple.

Bosdet notes that sales are much greater in London than in Northern Ireland, yet prices are about 8p to 10p higher. 

“With high volumes of fuel being used you would assume that economies of scale would allow those pump prices to be closer,” he says.

British fuel checker demand

The demand is there for a British fuel price checker. As petrol and diesel costs surged in the first half of 2022, the CMA spotted a tenfold spike in internet searches for “cheapest petrol near me”. 

Some information is out there already, but is seldom comprehensive and often sealed behind a paywall. Some even suggest that certain platforms will unfairly bump retailers up to the top of their list.

While a price checker reports data and lets economic gravity do the rest, PumpWatch would do its own calculations and settle on an “acceptable” price.

“If garages and their fuel suppliers do not display – for example – a PumpWatch kite mark, showing that their forecourt prices are fair and transparent, then drivers can choose to boycott,” Cox says. 

“A central PumpWatch database updated daily in the public domain with all the cost parameters required would show how the fairest prices are reached.”

Regulator’s importance

The debate around regulators is a long one, and seems to permeate every area from financial services to football. 

But in Cox’s vision, PumpWatch could not function without a price checker compiling prices across the country. 

Bringing in a system akin to Northern Ireland’s would lay the groundwork for any future action when the CMA concludes its investigation into fuel pricing.

“It would obviously be helpful to have a regulator of some kind,” says Bosdet. “But it’s got to go through the parliamentary process. 

They’ve then got to appoint a regulator, that regulator’s then got to get their feet under their desk and get a full understanding of what is going on. At best that would take about a year – I think it might take longer.”

Cost of living crisis

Fuel prices are still high, while motorists are being squeezed elsewhere by the cost of living crisis. 

Petrol and diesel will increase by at least 5p in March unless Jeremy Hunt extends the fuel duty cut in his spring budget. In these dark days, motorists need price transparency – and 2023 could be the year they finally get it.

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Source: The Telegraph



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