RAC urges retailers to cut fuel prices by 6p per litre amid cost drop

The RAC is calling on the UK’s biggest fuel retailers to cut fuel prices by 6p per litre to reflect lower wholesale costs.

The motoring organisation issued an urgent appeal, urging retailers to adjust their prices at the pumps to reflect a steady drop in wholesale costs, which began at the start of July and fell sharply last week.

With retailers found by the Competition and Markets Authority (CMA) to have overcharged drivers by £1.6bn in 2023, the RAC argues that the recent fall in oil prices and the strengthening of the pound — the two main factors influencing the wholesale price of petrol and diesel — present an opportunity for retailers to regain the trust of drivers by significantly reducing their pump prices.

Data from RAC Fuel Watch indicates that the delivered wholesale price of petrol averaged 103p per litre last week.

With a retailer margin of 10p — 2p more than the long-term average of 8p — this should lead to average prices of just under 136p including VAT, which is 6p lower than the current UK average of 142p. Diesel, currently averaging 147p, should be sold for 139p with a 10p retailer margin, given the wholesale price of 106p.

Further RAC analysis reveals that the UK has had the unwelcome distinction of having the most expensive diesel in Europe for 16 of the past 17 weeks, even with a 5p fuel duty discount.

The average price of a litre of unleaded at one of the big four supermarkets, which dominate UK fuel sales, is 138p, while diesel is 143p.

Interestingly, their petrol prices match the average charged across Northern Ireland, but diesel there remains 3p cheaper than at UK supermarkets, averaging 139.7p.

The RAC says it is also aware that some retailers are undercutting their larger supermarket competitors.

In Portlethen, Scotland, a newly opened forecourt under the EG On The Move brand was selling both petrol and diesel for 16p less than its nearest rival, Asda.

This prompted Asda to quickly cut its prices to match.

The new site at Portlethen is one of several that have opened recently as part of a deal between retailer Co-op and EG On The Move, which is run by Zuber Issa of EG Group.

His brother, Mohsin Issa, now runs Asda. EG Group sold most of its forecourts to Asda last year but retained 31 sites, which are now being converted to EG On The Move forecourts.

At the well-known, low-cost Essar-branded Grindley Brook forecourt in Whitchurch, Shropshire, a litre of unleaded costs 130.9p and diesel 133.9p.

This is slightly cheaper than membership-only retailer Costco, which charges an average of 130p for petrol and 134.7p for diesel at its 20 sites.

RAC head of policy Simon Williams said: “The biggest retailers’ refusal to reduce their prices to fairer levels continues to cost drivers dearly. It’s even more outrageous when considering we’re all supposed to benefit from a temporary 5p cut in fuel duty, which looks likely to end soon. While the Competition and Markets Authority has clearly stated drivers were overcharged last year, our data plainly shows this problem is persisting this year.

“Once again, we urge retailers to do the right thing and reflect the lower prices they’re paying for wholesale fuel at their forecourts. It’s clear from some of the lower prices being charged around the UK, both across Northern Ireland and at various other forecourts, that fuel can and should be sold much more cheaply.

“Our analysis indicates that pump prices at most forecourts should be cut by around 6p for both petrol and diesel. With wholesale prices down, drivers should not be seeing such high forecourt prices, especially since they are meant to benefit from a 5p fuel duty cut. Our Fuel Watch data shows this is happening as it should in Northern Ireland, but, for some reason, it doesn’t seem to be happening on this side of the Irish Sea.

“The average retailer margin currently stands at 13p for petrol and a staggering 15p for diesel. This is surprising compared to the long-term margin figures of 8p for both fuels.

“If a small independent retailer like DA Roberts at Grindley Brook in rural Shropshire can comfortably charge 131p per litre for petrol, surely the big supermarkets, which are multimillion-pound businesses, should be able to get much closer to that?

“If prices don’t drop dramatically in the next week or so, we believe the Government and the CMA should bring the biggest retailers together to demand an explanation. Tough action needs to be taken to change this as drivers are losing out badly every time they fill up. Artificially high pump prices also contribute to higher inflation. If prices were closer to where they should be, inflation would be lower, benefiting borrowers and the wider economy.”