The gap between the price of crude oil and the price of petrol is what’s led to drivers paying so much at the pump.
That’s according to a review of the road fuel market, published by the Competition and Markets Authority (CMA) and requested by Business Secretary Kwasi Kwarteng.
The difference between crude oil pricing and wholesale petrol and diesel prices is called the ‘refining spread’ and the report has revealed that this tripled in the last year, growing from an unprecedented 10p to 35p per litre.
This was the key driver in seeing fuel prices skyrocket – but not the only one.
Another critical contributor was the ‘retailer spread’ which was the difference in what was being charged by petrol stations to drivers, compared with the wholesale price – and this averaged 10p per litre on average.
To combat this, the CMA is urging the government to consider an open data scheme – that allows customers to transparently assess and understand local pump price information from their phones.
It believes this would help to prevent such disparity in what petrol stations are charging and therefore lower the retailer spread.
Overall in the last year, refining spread is responsible for 40% of the growth in fuel prices, the fall of the value of the pound is the reason for 12% and more than 33% is due to the fall in price of the dollar.
COVID-19, the Russian invasion of Ukraine and supply chain issues have been the main reasons for refining spread growing so rapidly – as wholesale sellers can determine the market price based on availability of product.
The CMA has confirmed that Rishi Sunak’s announcement of a 5p fuel duty has been reflected in recent prices, seeing them plateau slightly, however, this has not stopped them being so high.
Sarah Cardell, CMA General Counsel, commented: “The recent rises in pump prices are a major worry for millions of drivers. While there is no escaping the global pressures pushing up fuel prices, the growing gap between the oil price, and the wholesale price of petrol and diesel, is a cause for concern.
“We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it.
“On the whole the retail market does seem to be competitive, but there are some areas that warrant further investigation. These include finding out whether the disparities in price between urban and rural areas are justified.
“If evidence emerges of collusion or similar wrongdoing, we won’t hesitate to take action.”