AA defends retailers over prices

21 November, 2014

Petrol retailers are being unfairly criticised for not passing on savings to motorists as oil prices have plunged, according to the AA.

Since mid October, the average price of petrol across the UK, has dropped 4.3p from 127.22ppl to 122.93ppl this week. Diesel has also fallen by around 4ppl, down from an average of 131.30ppl last month to 127.43ppl now.

In its latest fuel price review the AA says the oil price has fallen more than 11% in the past six weeks, down from $90 a barrel to below $80. That has brought the wholesale price of petrol back to where it was almost exactly four years ago. However, petrol pump prices last week were 123.19ppl compared with 118.83ppl at the same time four years ago.

But the report pointed out that VAT is 2.5% higher now than in 2010, accounting for about 3p of the difference. When that is stripped out average prices last week were less than 1.5ppl higher compared with four years ago. It added that so far this week, that gap has closed to 0.75p as retailers pass on more of the reduction in costs.

The report said that while retailers’ and suppliers’ margins – once tax and the cost of the product is stripped out – were currently 1.5% more of the pump price than four years ago, refiners and petrol commodity traders’s margins were 3% greater than four years ago.

Currency fluctuations have also helped to keep prices up over the last month, as sterling’s loss of value against the dollar added more than 0.5ppl to the pump price of petrol, before VAT.

AA president Edmund King commented: “Since the oil price has fallen from $90 a barrel to well below $80 in the past six weeks, drivers have been giving the retailers stick for not bringing their pump prices down more. The Government jumped on the bandwagon at the beginning of November with the Treasury also putting pressure on retailers.

“The fact of the matter, though, is that retailers dragging their feet when passing on lower costs to the pump is only part of the problem.

“If the forecourts think they are being blamed unfairly and the Government wants to get it right when pointing the finger of blame for families and businesses being denied the benefit of lower fuel costs, there is a very simple solution: oil, wholesale and pump price transparency.”

He continued: ““Over the past nine years, the AA has called for fuel price transparency in the UK – as is the case in the US, Australia and south-east Asia. In 2012, the UK came within inches of getting it when the then transport secretary Justine Greening called in the fuel industry.

“But the industry threw up obstacles and last year’s Office of Fair Trading report into UK pump pricing whitewashed its importance.

“It is also about time the EU commission investigating oil and fuel prices reported at least some of its findings or gave a progress report - to explain why the commodity cost of petrol remains high when the oil price falls. European motoring organisations, representing 35 million motorists, still haven’t had a satisfactory answer as to why petrol’s commodity price hit $1,200 a tonne with oil at $147 a barrel in 2008 but then returned to $1,200 in 2011 with oil at only $125 a barrel.”

Keywords: AA, petrol, diesel, prices




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