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Current retailer margins are around 13p for petrol and 16p for diesel, says RAC

Falling pump prices are failing to keep pace with reductions in wholesale fuel costs, claims the RAC, which accuses retailers of taking higher margins than in the past.

The organisation says data from its RAC Fuel Watch survey shows that while motorists were paying 2.4p less for a litre of unleaded in May, at £147.88p, with diesel dipping by 4.5p to 153.58p, prices should be coming down faster based on what forecourt operators are paying suppliers.

“Data confirms that pump prices should be reduced to a much greater extent as currently there is a huge disparity between wholesale prices, which have been falling since late April, and what drivers are charged at forecourts. Retailers are persistently taking far higher margins than they have done historically,” says the RAC.

It claims that current retailer margins are around 13p for petrol and 16p for diesel, “despite the long-term margin on both fuels being around 8p per litre”.

“A month of decreasing fuel prices should be seen as a good one for drivers, but the sheer time it is taking for any meaningful price reductions to reach forecourts is if anything a continuing cause of concern,” says RAC senior policy officer Rod Dennis. “When it comes to much-needed pump price cuts, it’s sadly a case of too little, too leisurely, with most drivers still getting a miserable deal every time they fill up.”

However, Gordon Balmer, executive director at the Petrol Retailers’ Association, says that there are a number of changing influences that will lead to forecourts taking different margins at certain times, and so it is wrong to compare current retailer margins with those before.

“When discussing fuel margins, it is essential to differentiate them as ’retail margins before factoring in operating costs’. These costs cover a range of significant expenses such as fuel storage and distribution, staff wages, business rates, energy bills, and the costs associated with accepting fuel cards and dealing with crime. These rising costs inevitably influence the final pump price,” he said.

”Given these increased operating costs, using historical margins for example an average from the last 10 years, doesn’t accurately reflect the actual cost challenges retailers are dealing with today.”

The RAC says that its latest Fuel Watch data also shows that Asda no longer offers the cheapest supermarket fuel. In fact, it is now the most expensive of the ‘big four’ retailers, with Tesco, Morrisons and Sainsbury’s offering petrol for an average of 2.1p less per litre (145.25p compared with 147.38p at Asda) and diesel for 2.5p less, claims the organisation.

It says the lowest fuel prices are again in Northern Ireland, where a litre of petrol retails for 141.4p, which is 5.7p less than the UK average, while diesel is 9.9p cheaper than the national average at 142.5p.

It says the cheapest petrol in the UK is on sale at under 139p a litre at sites in Bishop Auckland in County Durham and St Leonards-on-Sea in East Sussex, and the most affordable diesel at 143p in Arbroath, Scotland.