A campaign by FairFuelUK for an independent pump pricing watchdog, appears to be gaining traction following press reports at the weekend that PM Boris Johnson is preparing to ‘declare war on rip-off petrol stations’.
He is apparently so ‘furious’, having been persuaded that petrol stations have failed to pass on the Government’s fuel duty cut, that he has pledged to ‘name and shame’ those forecourts that refuse to drop their prices. The Daily Telegraph reported that ‘three government sources’ had expressed fury that the 5ppl cut to fuel duty announced in March was failing to materialise at many pumps; and that Department for Transport officials have been ‘tasked’ with exposing those failing to pass on the cut.
However, PRA executive director Gordon Balmer, hit back: “Despite all fuel retailers passing on the 5p cut in fuel duty after the Spring Statement, wholesale fuel prices have continued to rise. This has resulted in a tightening of margins for petrol retailers, while the Exchequer has benefitted from substantially higher VAT receipts. For every 10p that the price rises, the Chancellor claims back an extra 2p in VAT.
“Since the Spring Statement, fuel retailers have made 0.39p less on every litre of petrol than before the statement. Our estimate of the net margins made by fuel retailers on a litre of petrol is around 6.0ppl. This is because retailers have to pay for the charges oil companies make for the storage and delivery of fuel to their forecourts and the Development Fuel Obligation (a Government levy to pay for the development of green fuels). When taking all the costs into account including rising electricity costs and additional labour charges, petrol retailers are operating on extremely tight margins, and at volumes lower than before the pandemic. They rely on shop sales to make the business work.
“The market for roadside fuels is highly competitive and dynamic. If the Competition and Markets Authority take a closer look at the industry, they will find competition drives down the price to the lowest possible levels.
“Holding down prices artificially would be an anti-competitive move. We would lose retailers and fuel supply from the market. We would start to see, on a regular basis, the kind of queues at petrol stations that we experienced during last year’s fuel crisis.
“We wrote to the Rt Hon Kwasi Kwarteng on the 18th May to reiterate that we agree that cuts to fuel duty should be passed on; and to reassure him that our members had done so. We also requested a meeting in the interests of total transparency to explain to Ministers and officials how fuel prices work. To date we have not received any response at all.”
Meanwhile, FairFuelUK released a statement, stressing that the organisation had worked closely with Harlow MP Robert Halfon and Fair Fuel APPG Chair, Craig Mackinaly MP, since 2016 to campaign for an independent pump pricing Watchdog, notionally called called PumpWatch.
Howard Cox Founder of FairFuelUK and Secretary to the APPG for Fair Fuel for Motorists and Hauliers, said the delivered proposal was lost in the build-up to the 2019 General Election, but what he describes as the “perennial diesel and petrol profiteering scandal” that FairFuelUK has been campaigning against for the last decade, is now even more relevant in the current financial crisis.
“At last, Boris Johnson and Transport Secretary Grant Shapps, seem to believe PumpWatch makes economic and political sense and maybe, just maybe, they are moving back in touch with voters.
“It’s time for the Conservative Government to throw away the chronic anti-motorist plans and recognise the common sense in giving drivers a well-deserved break and some honesty at the pumps.”
He claims that:
- Over 50,000 FairFuelUK Supporters have emailed the Treasury and their MPs calling for Pump Watch.
- 8 out of 10 FairFuelUK’s 1.7m supporters want such an impartial body created, just like consumer watchdogs Ofgem, Ofcom and Ofwat, to protect drivers every time they fill up, as and when oil prices vary.
- The 6ppl cut in Fuel Duty (5p plus VAT) announced in the Spring Statement has not reached the pumps.
“I am delighted the Government maybe at last acting on pump-price profiteering. For decades pump prices have been calculated using a secret formula known only to those businesses in the fuel supply chain. The pump-pricing formula does not bear any close correlation to Brent Oil price movements, even after taking into account Sterling to US Dollar exchange rates. When oil prices rise and fall, millions of drivers have absolutely no idea what subsequently, they will pay at the pumps each time they fill up their vehicles. It is never ever the same price! There is no consistency, logic or clarity to the way pump prices are calculated. As stated, this calculation remains a closely guarded secret in the fuel supply chain. PumpWatch would give fairness and transparency to UK’s 37m drivers and would benefit the economy too.”
“The perennial diesel and petrol profiteering scandal that FairFuelUK has been campaigning against, for the last decade is now even more relevant in a time of real financial crisis. PumpWatch is crucial to the Nation’s positive economic growth, jobs, business investment, logistics, consumer spending and social mobility. This beleaguered Conservative Government needs it in place now, to help regain trust again and to avoid long-term voter repercussions.”
Robert Halfon MP, Vice Chair of the APPG for Fair Fuel for Motorists and Hauliers said: “Struggling families need a PumpWatch regulator NOW. The rip-off oil companies are feeding the cost-of-living crisis as they refuse to cut prices at the pumps even when the international oil price has fallen. If we can have an energy price cap, at least have a fair price at the pumps.”
Craig Mackinlay MP, Chair of the APPG for Fair Fuel for Motorists and Hauliers said: “Sadly, the Government’s efforts to work with the fuel industry so that pump prices are competitive, and market driven, ensuring consumers benefit from lower prices, is not working. The reality is that motorists are now paying £16 per tank more than last year and nearly £2bn of falls in the wholesale price have not been passed onto hard-pressed motorists at the pumps. This is bad for the economy, bad for inflation, bad for business and bad for jobs. That’s why we need to introduce an independent pump-pricing watchdog now.”
In the PRA’s earlier letter to Kwasi Kwarteng, the Secretary of State at the Department for Business, Energy & Industrial Strategy (BEIS), executive director Gordon Balmer offered to explain how the industry works and that a 5ppl cut in the price of fuel in the Spring Statement was not enough to offset the factors contributing to rising pump prices. He wrote: “It is also worth noting that our members costs have risen significantly – for example, increasing electricity costs and the rise in the minimum wage.
He explained that price differentials arise because, in a dynamic and competitive free market, not all wholesale fuel is purchased at the same time and at the same price: “To further explain this some forecourts, operate on a fortnightly lag pricing platform, some on a weekly lag and some on a daily lag. A forecourt that operates on a fortnightly lag will be selling fuel based on average prices from two weeks ago, while one operating on daily lag will be selling fuel based on yesterday’s prices.
“Furthermore, price differentials between different locations arise because although sites may appear to be operated by the same retail chain, in reality they are not,” he wrote, stressing that a distinction must be drawn between an oil company owned site and dealer owned site.