RAC urges retailers to hold firm as fuel prices reach record levels, but are ‘fairer’ than in December

As petrol and diesel prices hit record highs, and oil prices approach $100 a barrel, the RAC has urged fuel retailers to hold firm, while accepting that forecourt prices are much ‘fairer’ than they were.

“Petrol has unfortunately hit a frightening new high of 148.02ppl which takes filling a 55-litre family car to an eye-watering £81.41,” said RAC fuel spokesman Simon Williams. ”With the oil price teetering on the brink of $100 a barrel and retailers keen to pass on the increase in wholesale fuel quickly, new records could now be set on a daily basis in the coming weeks.

“On a positive note, retailer margins – which were the reason drivers paid overly high prices in December and January – have now returned to more normal levels of around 7ppl. We urge the big four supermarkets, which dominate fuel sales, to play fair with drivers and not to make a bad situation on the forecourt any worse by upping their margins again.”

Gordon Balmer, executive director of the PRA, commented: “As it has been widely publicised, the tensions between Russia and Ukraine have pushed the price of oil to a seven-year high.

”As the situation unfolds over the coming days, the price of oil will be subject to further volatility. Other key factors to consider include continued tightness in the oil market and the Dollar-Sterling exchange rate.

”The PRA, which represents independent retailers, will continue to ensure that the price of fuel is as competitive as possible.”

The RAC estimates the cost of oil to have increased by more than 60% in the past 12 months, from around $60 last February, due to global oil production continuing to be out of kilter with demand which is now increasing as the pandemic begins to wane, with a barrel having risen as high as $98 in the last week. Recent tensions between Ukraine and Russia, with the latter being the world’s third biggest oil producer, have also caused prices to rise.

Nonetheless, the RAC claims that based on retailers taking a ’normal’ margin of around 6ppl, its Fuel Watch data shows there is no justification for average forecourt prices to rise very much from their current levels of 147.67ppl for petrol and 151.21ppl for diesel. But it claims pump prices have already increased by around 1ppl in February.

Williams said: “With the price of oil now at a level not seen in more than seven years and a ‘cost of living’ crisis mounting, we’re on a knife-edge when it comes to pump prices.

“On the face of it, the prospect of $100 a barrel oil is a frightening one but from a driver’s point of view it’s only going to spell bad news if major retailers decide to take bigger margins. At the moment, we can’t see any justification for a big leap in forecourt prices so we’re urging retailers to continue taking normal margins on each litre they sell. This will ensure drivers, many of whom depend on their vehicles, aren’t forced to pay even higher prices.

“Oil – and therefore wholesale fuel prices – may have gone up in recent weeks, but the profit made by retailers on the sale of fuel has come back down from December’s unbelievable heights to more normal levels, meaning the prices charged at forecourts today are actually much fairer than they were. The fact prices at the pumps have hardly changed despite oil approaching $100 demonstrates just how incredibly unfair retailer margins were in December – it was as if oil was already $100 a barrel then when it actually averaged just $87 across the month.

“Of course, if the cost of oil continues to climb or the pound loses value against the dollar then retailers will have no option but to pass on the increases at the pumps. Our Fuel Watch data shows we’re not quite at that point yet, but if oil were to reach $110 a barrel, and retailers kept their current margin, it would add about 7p to a litre of unleaded diesel, taking average prices to astronomic new levels of 154p and 158p respectively.”