Calls for lower fuel prices: Wholesale savings should be passed to customers

The RAC has called on supermarkets to slash their fuel prices by 5p per litre. According to RAC figures, supermarkets are currently enjoying margins of around 15p per litre on petrol and diesel.

By cutting this back to a margin of 10p, supermarkets could lower the average petrol price at the pumps to 152p per litre.

RAC fuel spokesman Simon Williams said: “It’s very sad to see retailers taking advantage of their customers by charging far higher prices than they should be. We urge the supermarkets to do the right thing by their customers and cut prices.”

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Pumping you for money: How we’re still paying too much for fuel, despite 9p-per-litre price drop

First published on 15 August 2022 by Dan Sutherland

Research into fuel prices across the UK has revealed that we should be paying less at the pumps, despite the average price per litre falling by nearly 9p in July.

According to findings from the RAC, the average cost at the pumps dropped by 8.74p across the UK to 182.69p a litre.

While that might sound good, it’s not as much of a result as it could’ve been. This is because the wholesale price has fallen for eight consecutive weeks, dropping from 151.93p a litre at the start of June to 131.75p in the final week of July. 

The last time prices were that low was early May and led to a UK average at the pumps a week later of 167p a litre. That’s far less than the current 182.69p average.

RAC fuel spokesman Simon Williams said: “July has been an unnecessarily tough month for drivers due to the big four supermarkets’ unwillingness to cut their prices to a more a reasonable level, reflecting the consistent and significant reductions in the wholesale cost of petrol and diesel.

“We saw independent retailers leading the charge with fairer pump prices appearing all around the country, which eventually forced the supermarkets to implement a more substantial cut late on the afternoon of July 29.

“The best advice is no longer to assume the supermarkets are the cheapest, but to shop around as it’s highly likely you’ll find an independent retailer which is doing the right thing and fairly reflecting their lower wholesale costs by charging a lower price.”

MCN asked readers whether they thought fuel companies should cut prices. Of the respondents, 95% were in favour.

The RAC’s findings come in the same week as BP’s announcement of an underlying profit of $8.5bn for the second quarter of 2022. MCN approached BP’s CEO Bernard Looney for a comment, but he was unavailable. A company representative was willing to speak on his behalf, however.

In this week’s poll, we’d simply like to know: Should fuel companies cut their fuel prices? To have your say, click one response below. Thanks!
— Motor Cycle News (@MCNnews) August 2, 2022
 

“We do understand things are exceptionally difficult for people right now,” BP said. “Prices at the pump are affected by costs of fuels on international markets – these are currently highly volatile and have risen sharply. 

“If we break down the cost of a litre of fuel, it’s around 40% for the fuel itself and about 47% for fuel duty and VAT, circa 10% for costs and margin of retailer.

“So, BP makes a profit margin of a few pence per litre on the fuel we sell – and we operate in competition with many other players. 

“Different governments are choosing different approaches to the cost-of-living crises. In the UK, the Government has already reduced fuel duty – which we passed on rapidly – and it has also chosen to introduce a profits levy. As a result, we’ll pay more tax, and the Government will decide how to use that money.”

BP’s comments are contested by the founder of FairFuelUK, Howard Cox, who said: “As oil prices have rocketed since 2020, the fuel supply chain has exploited drivers by doubling their profits through record pump pricing. They are directly responsible for making the cost-of-living crisis even worse.”

He continued: “I call on the Government, once and for all to punish the profiteering in the fuel supply chain. This can’t go on.”

What are the Government doing about fuel prices?

The Department for Business, Energy and Industrial Strategy told MCN: “We understand that people are struggling… which is why we have acted to protect the eight million most vulnerable British families through at least £1200 of direct payments this year, alongside other measures including the biggest ever cut to fuel duty rates, which saves a typical family £100.”

This £100 claim is based upon former Chancellor Rishi Sunak’s 5p-per-litre cut in fuel duty that took place in March 2022. The £1200 in support relates to a £15bn package to help with the cost-of-living crisis, announced on May 26 of this year.

The spokesperson continued: “The Competition & Markets Authority has launched a study… to consider what more can be done to ensure prices at the pumps are fair. “If evidence emerges of collusion or similar wrongdoing, the regulator won’t hesitate to take action.”

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Why is petrol still so expensive? Rishi Sunak’s cut tax but fuel prices keep rising

First published on 3 May 2022 by Ben Purvis

On March 23 Chancellor Rishi Sunak proclaimed the “biggest cut to all fuel duty rates – ever” as he sliced 5p per litre from the tax in an effort to combat rising costs – but that reduction hasn’t been reflected in pump prices.

In March alone the average cost of a litre of unleaded as measured by the Government’s own data broke the £1.50 barrier for the first time. It rose to £1.60 just one week later and peaked at £1.65 just before Sunak’s Spring Statement.

In contrast it took a decade for the price to rise from £1.40 – first breached in April 2012 – to £1.50 per litre. Since 20% VAT is added after fuel duty, that 5p tax cut should actually amount to 6p less cost per litre, but that’s not what we’ve seen at the pumps.

At the time of writing the average was 161.67p per litre, down only 3.7p on its March high of 165.37p.

Even before the Chancellor’s announcement, the Petrol Retailers Association (PRA), who represent about 65% of UK filling stations, warned that a tax cut would not be felt immediately because duty is charged at a wholesale level.

The petrol in each station’s underground tanks has already been taxed, so sellers don’t see the price cut until fuel stations pay for their next resupply. And they say rising wholesale costs have eroded some of the saving.

What does it all mean?

So has there been any real world reduction as a result of the tax cut? And what is it doing to the bike industry as a whole?

Tony Campbell, CEO of the Motorcycle Industry Association said: “It has been difficult to determine if this reduction has been fully passed on. As we all experience a regular change to the price at the pump, any benefit has now been completely eroded.

“We expect prices to remain high and as such we believe it will influence our sector both positively and negatively.”

It’s not all bad news

“If you ride purely for leisure you may choose to do this less frequently or travel fewer miles. That said, as a motorcyclist, it will be one of the last things I will stop doing,” Campbell continued.

“If you travel to and from work by car, we believe more people will turn to small capacity or fully electric motorcycles and scooters as a cost-effective alternative.

“The market year to date is showing growth (plus 40%) across all sectors with electric leading the way, up by 85% compared to the same period last year.”   

The MCIA’s findings are backed up by MCN’s reader research. A snap poll run on our website over the last week found that 61% of riders have not (so far) let rising costs prevent them from getting out.

Poll: Are sky high petrol prices limiting your riding? To have your say, click one response below. Thanks!
— Motor Cycle News (@MCNnews) April 19, 2022
 

The retail cost of petrol closely mirrors the price of crude oil, which has hit record highs in recent months exacerbated by the Ukraine war that has resulted in wild fluctuations in oil prices

That high price means that despite the fuel duty cut there’s actually still more tax going into Government coffers now than there was before the price surge.

In May 2020, when unleaded was at its cheapest in recent years, at 104.87p per litre, duty and VAT added up to around 75p per litre. Now, despite the 5p duty cut, the higher cost means more VAT so in total there’s about 80p per litre going to the Government.

What’s next for petrol prices?

Crude oil prices define the cost of petrol, and while there’s little prospect of substantial reductions in the near future they currently appear to be at a peak – albeit in a very uncertain market. Crude oil is currently around $108 per barrel.

The US Energy Information Administration, which monitors international prices of Brent Crude, expects the price will average $108 per barrel in the second quarter of 2022 and then drop to $102 per barrel in the second half of the year.

The administration said: “We expect the average price to fall to $93 in 2023. However, this price forecast is highly uncertain. Actual price outcomes will depend on the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market.”

While positive news on fuel is thin on the ground, data shows that petrol stock at filling stations, which dropped enough before Easter to see some local shortages, are bouncing back to normal levels.