Petrol stations and supermarkets have shamelessly
"pocketed" the benefit of the Government’s fuel duty price cut, which
was intended to help motorists struggling with the cost of living crisis. This
is the claim of Harriett Baldwin MP, the chair of the Treasury Select
Committee. She has also accused the fuel retailers of not passing on the fuel tax
reduction to drivers.
Fuel duty was cut last March by 5
pence per litre, but there were concerns that this was not immediately
reflected in lower pump prices. An investigation by the Competition and Markets Authority (CMA) found the cut had been passed on, but said an increased profit
margins had then cancelled out the benefit of the tax cut.
The CMA has recently revealed that supermarkets,
who usually have cheaper fuel prices, had sought to increase profits from
selling fuel, increasing their margins by 6p per litre on average between 2019
and 2022. They also discovered that profit margins on diesel across all fuel
retailers had cost drivers an extra 13 pence per litre during the first five
months of this year.
Ms Baldwin claimed that because the
profit margins of sellers had been higher, the tax cut on petrol and diesel had
"gone straight to the bottom line" of the businesses. According to
her: "The thing that annoys me from a Treasury point of view is that the Chancellor
cut fuel duty by 5 pence to help families with their cost of living, and yet it
doesn't seem to have been passed on."
What have the supermarkets been doing?
The CMA began an investigation after
concerns were raised that fuel prices were not falling as fast as they should
be in response to the wholesale costs dropping. They found that supermarkets
were still typically the cheapest place to buy fuel, but warned that competition
between them was "not working as well as it should be."
The CMA noted that Asda (historically
the cheapest for fuel) and also Morrisons "made a decision to increase
their target margin" on petrol and diesel from 2021, with the largest
increase coming in 2022 and 2023.
It said other retailers, including
Sainsbury's and Tesco, "maintained largely passive pricing policies",
rather than responding to compete with Asda and Morrisons to secure more
customers, and "there followed the same trend in prices and margins.”
According to the CMA the additional
cost to drivers paying at supermarket pumps as a result of the higher margins,
was estimated to be "around £900 million" last year. It now plans to
force supermarkets and other fuel retailers to publish live prices under a new
scheme aimed at creating more competition between retailers, and reducing cases
of overcharging.
What do the supermarkets say?
Supermarkets chiefs, who were questioned
over fuel and food prices by MPs, denied that they were profiteering from
higher prices. Morrisons' chief executive David Potts told the Parliamentary Business
and Trade Committee that the supermarket had passed on the 5 pence cut to
customers "on the same day it was announced.” According to him: "Right
now the prices on our supermarket forecourts are lower than the independents
and continue to be so," He also claimed that energy, transport and labour
costs had all added to overall costs.
All supermarkets have backed the idea
of a price transparency scheme, similar to the type already in place in
Northern Ireland, where fuel is cheaper. However, the CMA has admitted that petrol
and diesel in Northern Ireland is less expensive than in other parts of the UK
because of competition from filling stations in the Republic of Ireland.
Darren Bugg, Editor of The Customer Service Blog said: “It’s patently obvious that fuel retailers have been profiteering recently, and it was very naïve of the Government to think that their 5 pence cut in fuel duty was ever going to be passed on to the motorists."
He continued: "If this wasn’t bad enough, they have also been very slow to pass on cuts in the
wholesale price of fuel, especially the cost of diesel which has been kept
artificially high for a very long time. This inevitably has led to an increase
in other forms of inflation, such as food inflation, which is partly dependent
on the cost of fuel to transport food items around the country.”
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