Petrol retailers told to pass on fuel duty cut

The government has raised concerns that petrol retailers are not passing on the recent cut in fuel duty, after diesel prices hit another record high.

Business Secretary Kwasi Kwarteng told petrol bosses the competition regulator is monitoring the situation.

However, petrol retailers said their costs had remained high.

The Petrol Retailers Association said margins were "often not enough to cover operating costs".

Chancellor Rishi Sunak implemented the 5p per litre cut in fuel duty in March to reduce the price of fuel for motorists.

In a letter to the industry, the business secretary said the public was "rightly expressing concern about the pace of the increase in prices at the forecourt".

He said people were frustrated that the 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.

Mr Kwarteng said his officials recently engaged the Competition and Markets Authority about the issue, as a result of "perceived intransigence to date".

"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 competition or consumer law," he said.

UK diesel prices rose to a record of just over £1.80 a litre on Monday, the RAC said.

After the previous record of £1.79 in March following the Russian invasion of Ukraine, prices dipped but have risen again in recent weeks.

The RAC said petrol prices went up by nearly 3p a litre since the start of May and were £1.66 a litre on average.

It said retailers are taking an average profit of 2p per litre more than before the chancellor's 5p duty cut.

But Gordon Balmer, executive director of the Petrol Retailers Association, which represents independent forecourts, said comparing pump prices against 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.

He added that if the government wanted to lower pump prices, it should reduce fuel duty by more than 5p.

"5p per litre did not represent a substantial enough cut to ease the burden of rising prices on motorists," he said.

"While the chancellor was announcing it, oil prices rose and effectively cancelled out the reduction. In addition to this, sales volumes of petrol and diesel are still not back to their pre-pandemic levels.

"Supermarkets and independent fuel retailers are competing vigorously with each other on the thinnest of margins."

The row follows a warning that supermarkets have also not passed on the fuel duty cut and falls in wholesale fuel prices.

The RAC motoring group does not believe the top four supermarkets - Asda, Morrisons, Sainsbury's and Tesco - are doing enough to help customers cut their fuel bills.

RAC fuel spokesman Simon Williams said: "Despite operating just a fifth of petrol stations in the UK, the big supermarkets are responsible for around half of all fuel sales so how they choose to price petrol and diesel has a huge impact on what drivers end up paying."

He added: "When wholesale fuel prices fall dramatically it can be enormously frustrating for drivers when pump prices don't start coming down. It normally takes one retailer to effectively 'fire the starting gun' and cut its prices in order for others to follow.

"We know that the biggest retailers tend to be reluctant to reflect falling wholesale prices at the pumps day-to-day, yet they seem to pass on increases quickly when wholesale prices are rising. This can often be to the detriment of drivers."

The RAC believes that supermarkets often wait for long sustained drops in wholesale prices before they cut their forecourt prices. If they cut the retail price too soon and then the wholesale price rises again, they will be forced to reintroduce a higher price which looks bad to customers, according to the motoring organisation.

A Sainsbury's spokesperson said: "We understand that the cost of living is a real challenge for many households and we are committed to helping our customers as much as we can.

"We lowered prices the day the chancellor announced fuel cuts so that our customers could benefit as soon as possible."

Morrisons said it took the full 5p from its prices at 6pm on the day of the chancellor's announcement.

Asda and Tesco have not yet responded to the BBC's request for comment.