Fuel companies under pressure to pass on savings to UK motorists

British government urges fuel retailers to pass on 5p tax cut to motorists at the pump

The average price for a litre of diesel was 179.7p on Monday. Getty Images
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Downing Street is calling for fuel companies to pass on tax cuts to UK motorists as diesel prices hit a record high.

Business Secretary Kwasi Kwarteng wrote to the industry “to remind them of their responsibilities” following claims that petrol retailers had not passed on a 5p per litre cut in fuel duty to consumers.

It comes as the government warms to the idea of a windfall tax on energy companies. On Tuesday, Chancellor Rishi Sunak repeated his claim that “no option is off the table”.

The average price for a litre of diesel was 179.7p on Monday, figures from the Department for Business, Energy and Industrial Strategy show. This is up from a week earlier when it was 178.4p.

The average price of petrol on Monday was 165.1p per litre. That was narrowly below the record of 165.4p set on March 21, based on the government’s figures.

Separate fuel price statistics from data firm Experian Catalist using a different methodology show average prices on Monday were 180.3p per litre for diesel and 166.8p per litre for petrol.

Chancellor Rishi Sunak enacted a 5p per litre cut in fuel duty on March 23 to help cash-strapped motorists.

But the Royal Automobile Club said retailers are taking an average profit of 2p per litre more than before the policy was introduced.

The firm’s analysis showed the average margin for a litre of petrol and diesel is currently 11p and 8p, respectively. In the month up to the duty cut, it was 9p for petrol and 6p for diesel.

In his letter, Mr Kwarteng said the British people are “rightly expressing concern about the pace of the increase in prices at the forecourt” and are “rightly frustrated that the chancellor’s fuel duty cut does not appear to have been passed through to forecourt prices in any visible or meaningful way”.

“It is also unacceptable that different locations even within the same retail chain have widely different prices,” he wrote.

“The chancellor and I therefore want to re-emphasise and communicate again our expectation that members do everything possible to ensure that drivers are getting a fair deal across the country.”

The business secretary said that, as a result of “perceived intransigence to date”, his officials recently engaged the Competition and Markets Authority about the issue and the regulator has been “closely monitoring the situation”.

“I have been reassured that they will not hesitate to use their powers to act against petrol stations if there is evidence that they are infringing on competition or consumer law,” he added.

The prime minister's official spokesman said on the issue: “The public rightly expect retailers and others in the supply chain to pass on the fuel duty cut at the forecourts. It’s the biggest cut ever on all fuel duty rates and can mean big savings for families.

“We know that a number of retailers — big supermarkets, Asda, Tesco and Sainsbury’s — are passing on the cuts and we will raise this with other petrol retailers.

“The business secretary will be writing to the industry again to remind them of their responsibilities here so they should be in no doubt about the need to make sure that everyone is passing on these cuts on the forecourt.”

Gordon Balmer, executive director of the Petrol Retailers Association, which represents independent forecourts, said comparing pump prices with wholesale prices “only gives a partial picture”.

Once “additional expenses” such as storage and delivery costs are taken into account alongside the “volatility of product prices”, retailers’ margins are “often not enough to cover operating costs”, he said.

Rishi Sunak told the Commons: “We are pragmatic and what we want to see are energy companies who have made extraordinary profits at a time of acutely elevated prices investing those profits back into British jobs, growth and energy security.

“But as I have been clear, and as I have said repeatedly, if that doesn’t happen soon and at significant scale then no option is off the table.”

Conservative former minister Robert Halfon told MPs: “The oil bosses are earning multimillion-pound salaries and getting multimillion-pound bonuses, they are in essence in my view the new oligarchs and I would urge him to consider both a windfall tax on the oil companies which we can then use to cut taxes for the lower paid or cut energy bills, and also introduce a pump watch monitor to make sure that there is fair competition, that consumers get a fair deal at the pumps.”

Labour shadow climate change secretary Ed Miliband said that a windfall tax had the backing of former Conservative leader Lord Hague, and claimed similar measures had been used by past chancellors including George Osborne.

He added: “The truth is, they have run out of excuses, and amidst the chaos and confusion about what their position is, I think a massive U-turn is lumbering slowly over the hill. But I say this to the Chancellor: swallow your pride and get on with it.”

Updated: May 18, 2022, 6:48 AM