Business secretary Kwasi Kwarteng has written to the Competition and Markets Authority (CMA) asking for an “urgent review of the fuel market” as prices at UK forecourts hit record highs.
The letter said that despite the government’s £5bn fuel duty cut “there remains widespread concern about the pace of the increase in prices at the forecourt and, that prices may not fall as much or as fast as they rise”.
The business minister wants the CMA to look at whether the cut has been passed on to customers as “the British people are rightly frustrated that the £5bn package does not always appear to have been passed through to forecourt prices”.
He also asked for the investigation to examine “whether the retail fuel market has adversely affected consumer interests”, including whether there are local variations in petrol and diesel prices.
“Drivers should be getting a fair deal for fuel across the UK,” said Kwarteng. “Healthy competition between forecourts is key to achieving this, with competition working to keep pressure on prices.”
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He has asked for the CMA to respond with the findings by 7 July.
The price of filling the tank of an average family car with petrol has hit £100 for the first time as the cost of living crisis deepens. A cost of a complete diesel fill-up rose to £103.43, according to figures from the RAC last week.
Soaring fuel prices have been driven by the war in Ukraine and moves to reduce Europe’s dependence on Russian oil.
The Petrol Retailers Association (PRA) says its members passed on the 5p fuel duty cut after it was announced in March, but wholesale fuel prices have continued to rise since then, leaving fuel retailers “operating on extremely tight margins”, according to the BBC.
In May, Gordon Balmer, executive director of the PRA, hit out at the government saying: “Despite all fuel retailers passing on the 5p cut in fuel duty after the spring statement, wholesale fuel prices have continued to rise. This has resulted in a tightening of margins for petrol retailers, while the Exchequer has benefitted from substantially higher VAT receipts. For every 10p that the price rises, the chancellor claims back an extra 2p in VAT.”
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The AA welcomed the CMA review but called for a further fuel duty cut. “The government is still making 8.74p more in VAT than they were this time last year,” Edmund King OBE, president of the AA, told the BBC’s Today programme, “so there is money there for another possible duty cut.”
He also said that retailers should publish fuel wholesale prices alongside pump prices in order to “increase competition locally” and keep prices down.
King pointed to differences of up to 8p a litre between local garages and supermarkets.
It comes as the Confederation of British Industry (CBI) warned households are heading for recession later this year.
The CBI significantly downgraded its GDP growth outlook to 3.7% in 2022, from 5.1% previously, and 1% in 2023 from 3% previously.
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High inflation is the primary source of weaker growth, with the record high cost of living resulting in a “historic squeeze” in household incomes, which will lower consumer spending, the CBI warned.
High inflation has caused real household disposable incomes to fall by 2.3% over 2022 — marking the largest annual decline on record since the mid-1950s.
Watch: Petrol prices: Average cost of filling a family car hits £100 for first time
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