Petrol stations are to be investigated over a failure to pass on falling wholesale prices to drivers, amid suspicions fuel retailers are using the war in Ukraine as cover to bolster their profits.
The Competition and Markets Authority (CMA) said yesterday it has witnessed "rocket and feather" pricing.
This is where prices rise sharply like a rocket to accommodate higher oil prices and other costs, but then drop slowly like a feather as market prices fall back. Under this arrangement, retailers keep the difference between wholesale prices and pump prices as costs fall back.
The CMA reported that annual retailer fuel margins are increasing, but the causes are not yet clear.
Between 2017 and 2021, the difference between the price retailers paid for fuel and the pump price (the fuel margin) rose by the equivalent of 2p-3p a litre on diesel and 3p-4p a litre on petrol.
The authority said its analysis found no evidence of "rocket and feather" pricing before 2022. However, it saw some evidence of rocket and feather behaviour emerging this year - particularly for diesel.
Most volatile year
The CMA said 2022 has been the most volatile year for fuel prices since reliable records began.
Prices rose by around 50p a litre from January to July, the largest leap in fuel prices ever recorded in one year, before falling by 31p for petrol and 14p for diesel since.
It added that the gap between diesel and petrol prices has become larger than ever before. Diesel now costs around 24p more per litre than petrol.
The CMA said this is largely due to western Europe's reliance on imports of diesel, but not petrol, from Russia.
The RAC's latest average UK price for petrol is 158.91p a litre and diesel at 182.71p.
The organisation's fuel spokesman Simon Williams told the Telegraph: "While it's encouraging the CMA has found evidence of 'rocket and feather' pricing taking place this year, we believe there was clear evidence of it happening this time last year and in 2018 and 2019.
"Volatility has unquestionably been an issue in fuel pricing since Russia invaded Ukraine, but when wholesale prices trend down for weeks at a time drivers should see pump prices do the same at a similar rate. Unfortunately, our data shows that this is not often the case."
Higher fuel prices
The authority also found evidence that areas with fewer petrol stations, and thus less competition, had higher fuel prices, particularly in areas with no supermarket-owned pumps.
Supermarkets often sell fuel on smaller margins than dedicated petrol station networks in order to lure shoppers to their stores.
Interim CMA chief executive Sarah Cardell said: "It has been a terrible year for drivers, with filling up a vehicle now a moment of dread for many."