Government to investigate fuel prices following record high
Probe into fuel prices will evaluate whether drivers received the 5p cut in fuel duty announced earlier this year, and could lead to further intervention...
Drivers could see a reduction in fuel prices thanks to a new review of the cost of petrol and diesel, launched by the Government's Competition & Markets Authority (CMA).
The investigation, requested by Kwasi Kwarteng MP – the Secretary of State for Business, Energy and Industrial Strategy – will initially look into whether the 5p cut in fuel duty announced as part of the Spring Budget in March was passed on to drivers.
It will also evaluate regional differences in pricing to determine whether individual forecourts are charging extortionate sums for fuel, or whether there are valid reasons for increased costs at some stations.
If the initial report, due on 7 July, finds that fuel retailers have breached consumer or competition law, the CMA could issue fines totalling up to 10% of a company’s annual turnover. In some cases, that could equal millions of pounds.
However, if it is found that most retailers did pass on the 5p per litre cut in fuel duty, the Government could introduce further measures to push down prices. Chancellor Rishi Sunak recently announced a one-off tax on energy companies recording increased profits as oil and gas prices soar.
When the report is completed, the CMA will consider what further action is necessary, including whether it is appropriate to produce a long-term market study. Such a study would look into how fuel retailers compete with each other, as well as the impact of geographical factors on pump costs.
According to breakdown provider the RAC, the average cost of a litre of petrol on 5 June was 177.88p, while the average cost of diesel was 185.01p. A week later, on 12 June, petrol had risen to an average of 185.04p, while diesel had increased to 190.92p.
Those price increases saw the cost of filling a typical family car with a 55-litre fuel tank with petrol rise from £97.83 to £101.77 within a week. Meanwhile, the cost of filling it with diesel rose from £101.76 to £105.01 – the first time it has breached the £105 mark.
RAC fuel spokesperson Simon Williams said the CMA’s review “should help ensure that drivers pay a fairer price at the pumps in the future”. Williams also noted that drivers lose out most when retailers don’t pass on savings in the wholesale price of fuel. Williams believes that a big drop in the price of oil in December did not translate to lower forecourt prices for drivers.
However, the Petrol Retailers Association has defended its members, with executive director Gordon Balmer saying: “By law the 5ppl fuel duty cut has to be passed on – and it has been. Petrol retailers have been unfairly scapegoated for rises in the wholesale price of fuel over which they have no control.
“If the Government wants to ease the burden of pump prices on motorists, they should cut fuel duty by a much more substantial margin.”
Williams estimates that the Government makes around £46 in tax on each full tank of fuel.
According to research undertaken by What Car? in April 2022, nearly one in five car buyers were considering switching to an electric car because of the rising cost of fuel and living.
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