CMA finds major fuel retailers still cashing in on increased margins

Supermarket fuel margins in 2023 year-to-date have been higher than previous years on a percentage basis, a new report from the Competition and Markets Authority (CMA) has found.

However, the CMA figures show that supermarket fuel margins are slightly down on 2022, on a pence per litre (ppl) basis, due to lower wholesale costs.

Publishing road fuel monitoring update reports approximately every four months, this latest study from the CMA says that the 2023 figure was driven by particularly high fuel margins early in the year.

From May, the average monthly fuel margin has fallen month-on-month, from 11.9ppl in May to 7.3ppl in August.

However, the CMA says that even the August figure is higher than the annual average for years prior to 2021, and the data on increasing retail spreads in September and October suggests that supermarket fuel margins may have increased since August.

Supermarkets have retained a level of price discount to other types of retailers consistent with long-term trends between end-May and end-September.

The CMA has also seen fewer cases of non-supermarket retailers being cheaper than the supermarket average compared to late 2022 and early 2023 (though this is more common than prior to 2022).

Within the group of supermarkets, the traditional price-leader, Asda, has more consistently been the cheapest supermarket provider, on average, across both types of fuel, from end-May to end-September.

Overall, the picture on recent developments in the market is mixed, with some concerning signs emerging in September and October, it says.

RAC fuel spokesperson Simon Williams said: “It’s very disappointing that the CMA has found that major fuel retailers are still taking far bigger margins than they have done in the past, something we have been saying for a long time, as this means drivers are still being taken advantage of at the pumps.

“While supermarket margins may have fallen in the summer, our latest data shows they have more than made up for this since then and are currently taking very large margins.”

The reduced retail spread and falling supermarket fuel margins in the summer are positive, according to the CMA, alongside the evidence suggesting stronger price leadership by the traditional price leaders - the supermarkets, in particular Asda.

However, the CMA report stresses that this should not be overstated. While lower than earlier in the year, even the August levels of supermarket fuel margins are above those seen prior to 2021, and the spreads data from September and October suggests that competitive intensity may have weakened again.

“Even though off the back of the CMA report in the summer the largest retailers are now voluntarily publishing their prices daily for app-makers to use, our data shows this has had no effect whatsoever in improving competition and lowering prices,” continued Williams.

“In fact, we believe the situation is currently worse than ever as the wholesale fuel market is down significantly, yet forecourt prices are falling like the proverbial feather.

“It’s blatantly clear to us that a price monitoring body – as recommended by the CMA – is desperately needed as major retailers cannot be trusted to price fuel fairly for their customers.

“But unless this body has the power to take action against major retailers that don’t lower prices quickly enough in a falling wholesale market, we fear little will change even then.”

The CMA says it will consider how both spreads and margins develop in its next monitoring update.

More generally, it observed significant volatility in the market in its market study and it says it will need to continue to monitor the market to understand if the trends will continue.

In particular, in its market study final report it found that following wholesale price peaks, there was evidence of feathering of prices (i.e. retail prices falling more slowly than the norm compared to wholesale prices), particularly in relation to diesel in the first part of 2023.

Given the recent wholesale price increases, the CMA says it will be watching carefully to see if there is any evidence of feathering practices emerging as wholesale prices stabilise or fall.