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Supermarkets do not pass on low fuel prices

Fuel pump

Fuel pump

The RAC said supermarkets were not cutting fuel prices to match the “significant” fall in wholesale fuel prices.

The motoring group said the gap between pump prices and wholesale prices has widened in almost a decade.

Petrol prices were around £1.76 per liter on Tuesday, but RAC analysts suggested it should be around £1.62.

Fuel prices hit record highs this year, but are slowly starting to fall.

Earlier in the week, the RAC said the average petrol price in the big four supermarkets of Tesco, Asda, Sainsbury’s and Morrisons was £174.4 per litre. Diesel was £1.86

Meanwhile, the wholesale price of petrol delivered last week was £1.24, while diesel was £1.38.

After factoring in VAT, fuel duty and a “generous” retailer margin of 10p per litre, the RAC said “the front line should soon sell for no more than £1.62”.

“There has been a big change in the behavior of the four major supermarkets that dominate UK fuel retailing over the last few months, as they are now often undercut by independent retailers who pass on wholesale cost savings, benefiting drivers at the pumps,” said Simon Williams, the RAC’s fuel spokesman.

“This is unheard of as supermarkets are generally at least 3p a liter cheaper than the UK average.”

The reason supermarkets are often cheaper than independent retailers is that they buy fuel more often, which means they react more quickly when wholesale prices rise or fall.

Mr. Williams said that “when wholesale prices rise it is usually demonstrated by the speed with which they pass the increase on their front.”

“Supermarkets account for a large proportion of all fuel sold across the country and as much as they have not reduced their prices, this means that average UK prices have not fallen in line with the significant fall in wholesale fuel,” he added.

Tesco, Sainsbury’s, Asda and Morrisons have been contacted for comment.

The gap between retail and wholesale prices, excluding VAT, has widened since the RAC began monitoring them in 2013.

The RAC said the current gap exceeds the difference between wholesale and retail prices when the country went into lockdown at the start of the pandemic and oil prices fell to around $13 a barrel. Oil has hovered around $100 per barrel in recent months.

A graphic showing what drives petrol prices

A graphic showing what drives petrol prices

Fuel prices were already rising before the start of the war in Ukraine in February, but the fallout from the Russian offensive has made things worse.

Russia is one of the world’s largest oil exporters, but faces sanctions as a result of its actions in Ukraine. This has increased demand for oil from other producers, leading to higher prices.

Although the UK imports only 6% of its crude oil from Russia, it is still affected when global prices rise.

Petrol and diesel prices generally move when crude oil prices rise or fall.

In mid-June, the RAC revealed that petrol prices hit new record highs every day for a month, causing the average family car to cost more than £100 to fill up.

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