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Small Business Dismayed At Lack Of Action Over Petrol Prices From The OFT

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Petrol prices are more affected by wholesale price increases and tax than unfair practices, OFT report finds
Petrol prices are more affected by wholesale price increases and tax than unfair practices, OFT report finds

The Office For Fair Trading (OFT) has disappointed millions of businesses by declaring petrol price increases were caused by increases in tax and the wholesale price of crude oil - disregarding claims of price-fixing between the forecourt giants.

Pre-tax, the UK has some of the cheapest road fuel prices in Europe, according to the OFT's research. In the 10 years between 2003 and 2012, pump prices increased from 76 pence per litre to 136 for petrol, and from 78 pence per litre to 142 for diesel, caused largely by an increase of nearly 24 pence in tax and duty and 33 pence in the cost of crude oil.

The big four supermarkets' forecourts have also played a part in the price wars, owning 39% of the petrol sold on forecourts market today. The average price of petrol at supermarkets was two pence per litre cheaper than the average at oil company owned sites and 4.3 pence cheaper than the average charged by independent dealers.

The OFT recognises that many independent dealers have found it difficult to compete in this sector, with a significant number exiting the market. Overall, the number of UK forecourts has fallen from 10,867 in 2004 to 8,677 in 2012, although the rate of decline appears to have slowed in the last three years. But in the majority of areas where forecourts closed between November 2011 and August 2012 retail competition still appears to be strong.

The report concluded there was enough competition in the UK for petrol pumps, and while fuel is often significantly more expensive at motorway service stations, and in rural areas, no strong action has been taken.

Prices on motorway services could be 7.5 pence per litre higher on average (and 8.3 pence per litre higher for diesel) than at other UK forecourts, leading the OFT to ask the Department for Transport to consider introducing new road signs that would display service station petrol and diesel prices for motorway drivers.

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Clive Maxwell, the OFT's chief executive, said in a statement accompanying the report: "We recognise there has been widespread mistrust in how this market is operating. However, our analysis suggests that competition is working well, and rises in pump prices over the past decade or so have largely been down to increases in tax and the cost of crude oil.

"Our call for information has not identified any evidence of anti-competitive behaviour in the fuel market at a national level, where competition appears to be strong. There may be some issues at a local level. Where we receive evidence of potential anti-competitive behaviour we will consider taking action. For example, we have recently opened an investigation into the supply of road fuel in the Western Isles of Scotland."

But John Walker, national chairman of the Federation of Small Businesses, said he was unsatisfied, and "deeply disappointed at the OFT's decision not to launch a full investigation into the workings of the UK road fuel market".

"In recent years, we have seen a remorseless increase in the price of fuel that is paid at the pumps. This is set to rise with wholesale costs having risen by five pence since Christmas. We believe there is a clear disconnect between wholesale fuel prices and the price hard-pressed motorists are forced to pay at the pump.

"When the price of oil increases fuel price rises follow soon afterwards, but reductions in the wholesale price are not being passed on when it falls. Our own research shows too many small firms are having to pass on to rising costs to their customers and more than three quarters of members believe their business is being negatively impacted by the high cost of fuel."