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As any regular readers of this column may have noticed, it is not very often that I find myself agreeing with the ‘consumer champions’ who accuse the forecourt retail industry of ‘over-pricing’ fuel.

But given what’s happening in regard to diesel pricing at the moment, I find myself in the strange position of having to concede that they might (on this occasion) have a point. Or at the very least, say that there is something that needs to be addressed – urgently.

At the time of writing, typical pump prices for unleaded petrol are around 147ppl while those for diesel are around 164ppl – although with considerable variation even within the same geographic areas. Take Costco for example: ‘Regular U/L’ currently 135.9ppl; ’Premium U/L’ 144.9ppl and ’Premium Diesel’ (the only grade that they sell) is 148.9ppl. Now ’Premium Diesel’ pumps seem to have been disappearing from many forecourts over the last couple of years, but if a forecourt still has them and if their ’Regular Diesel’ is around 164ppl then it’s a fair bet that their ’Premium Diesel’ will be somewhere around the 175ppl+ region.

So we have a wide gap between petrol and diesel prices – and a considerable range in diesel prices anyway, to boot – that is fact. If Costco can sell ’Premium Diesel’ at below 150ppl, then why is the typical pump price of ’Regular Diesel’ elsewhere at 162ppl? And what appears to have provoked outrage with the likes of the RAC is that wholesale prices of both petrol and diesel have been almost the same (around 115ppl) for most of March. And that is also fact.

And in case anyone thinks that taking Costco as a benchmark is ‘extreme’, it has been fairly widely noticed that many genuinely independent fuel retailers have also managed to sell regular diesel for rather less than 162ppl; prices around 150ppl have been seen around the country during March. So it appears that it can be done – and when it has been, it has been done by individual retailers running maybe a handful of sites, rather than any of the large corporate site networks which dominate the market.

Just for a change, it’s the position of the supermarkets which has drawn the ire of the ‘consumer champions’ on this occasion. Now those of us who’ve spent a large part of our working lives in the ‘independent fuel retail’ sector are used to the complaint that the big supermarkets are the people who’ve made life difficult for everyone else trying to sell fuels because they always bring retail prices down to levels which are unsustainable for sites that don’t have their volume or cost base.

And while a few brave ‘independents’ have managed to compete on price with the behemoths over the years, they have been few and far between. So while it’s not completely unheard-of for independent retailers to beat the supermarkets on price, it usually doesn’t last for very long; except that we’ve been seeing more of them doing it recently, and the supermarket prices don’t seem to have moved downwards in response. But then again, the same might be said of most of the rest of the industry.

When you look at the fuel retailing industry as a whole, it is still largely dominated by a number of extensive networks. The only difference between the situation today, as opposed to (say) 30 years ago, is that many of the largest corporate networks are no longer the fuel suppliers. In other words, whereas once the industry consisted of many forecourts that were owned and operated by the same oil companies that extracted and refined crude before selling it to consumers – ie completely vertically integrated – today there is broadly (although not completely) a split between the suppliers and the retailers. But the number of sites operated by genuine ‘independents’ – the dealers who own a dozen sites or fewer – remains very low.

At the present time there is ongoing a ‘review’ of the forecourt retailing industry by the Competition & Markets Authority (CMA). In itself this is hardly new, since there have been many previous such ‘reviews’ and ‘investigations’ over the years by the CMA and its various predecessors  such as the old Monopolies Commission), and frankly I struggle to remember which of their reports ever had much practical impact on the industry. Quite often by the time a regulator had finally issued their report, it tended to be out of date, and the industry itself had moved on due to external factors - such as competition from (and between) the supermarkets, for example.

But it would be unwise to assume that just because it’s yet another in a long line of such ‘reviews’ it can be ignored and that it’ll be ‘business as usual’ after the review is completed. Which brings us back to what appears to be a prima-facie case that a considerable portion of the petrol retailing industry is over-charging consumers for diesel: while wholesale prices of diesel have fallen to near-parity with unleaded petrol over a period of many weeks, the price differential at the pumps remains unexplained by the industry. That seems somewhat odd at a time when consumers are still facing rising costs across the board, and when the government and Bank of England are trying desperately to control inflation rates – and as we know, fuel prices are one of the driving forces of the very same RPI/CPI indices on which both the government and Bank of England base so many economic decisions affecting the rest of the economy.

So far the near-complete absence of anyone in the industry willing or able to stand up and justify the current position is quite striking. This does not seem like a particularly good time to do anything that might draw official attention (yet again) to the structure and pricing mechanisms of the fuel retailing industry. Which is why the failure to either justify or change the status-quo could turn out to have unforeseen and unintended consequences for the industry in the longer-term.



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