UK regulators to investigate fuel price mark-up at refineries

Competition authority says it will take action if evidence of collusion is found

High energy prices are driving inflation in the UK, which is expected to reach 11 per cent this year. PA
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British regulators have opened an inquiry into the runaway cost of petrol, amid concerns over why the price of oil is climbing so much on its journey from the barrel to the pump.

The Competition and Markets Authority said fuel companies were paying almost 35 pence (42 cents) more for every litre coming out of a refinery than the crude oil had cost when it came in.

That figure ― the so-called "refining spread" ― has more than trebled from 10p in the past year and is the main source of rising forecourt prices, the regulator said.

At the following stage, when retailers sell their fuel to customers, the mark-up stayed unchanged at about 10p per litre from a year earlier.

Business Secretary Kwasi Kwarteng ordered a review of the sector last month, saying the public was "rightly frustrated" about the fuel prices driving high inflation.

A recent cut in fuel duty was generally passed on to customers, said the authority, but its general counsel, Sarah Cardell, said the refining spread was a cause for concern.

"We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it," she said. "If evidence emerges of collusion or similar wrongdoing, we won’t hesitate to take action."

The regulator said there appeared to be some legitimate reasons for the growing mark-up, such as refineries being put out of service during the pandemic and the effect of the war in Ukraine.

But it said the refining spread had grown substantially in recent months and ought to fall back towards more normal levels in the coming months.

It said another area in need of investigation was whether urban and rural fuel prices needed to differ as much as they do, with customers in more remote areas facing a higher bill.

A statement from fuel industry body UKPIA said it would "work constructively" with regulators to understand the rising prices.

But it said the British fuel sector had a "competitive domestic supply chain" and that prices were most likely to be affected by external supply and demand shocks.

"At a time when the cost of living is rising, UKPIA understands that recent price increases at the pumps will be a concern for motorists, families and businesses across the UK," it said.

"Tax is also a significant cost, which accounts for a large proportion of the pump price. We would note that when fuel duty and tax is excluded, UK petrol and diesel prices have been consistently among the lowest in Western Europe."

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Updated: July 08, 2022, 3:14 PM