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Retail margins on petrol falling says AA

27 January, 2016

Retail margins on petrol have fallen, according to the AA, while profiteering by refiners and petrol commodity market players has deprived consumers of savings of up to 5ppl.

In its latest AA Fuel Price Report, it says: “AA research finds that during the periods of early 2014, early 2015 and late 2015, subtracting the cost of wholesale, ethanol and tax from the pump price leaves a fairly consistent 8ppl. This covers retailer and supplier margins, transport and other costs (including VAT). That gap has now closed by around a penny a litre, pointing to lower margins in the retail sector.”

The report highlighted the fact that the average price of petrol had stuck at around 102ppl for the past month while there had been large falls in the price of oil from above $37 to below $28.

It said the primary causes of the pump price deadlock were:

• the value of petrol in commodity markets, when compared to the price of oil, rising 30% and negating much of the benefit of cheaper oil

• the pound weakening against the dollar (oil and commodity market petrol are valued in dollars), equivalent to a penny on the pump price of petrol

• the cost of ethanol rising from below $450 a cubic metre this time last year to around $600 now, equivalent to 0.75p on the pump price of petrol.

AA president Edmund King said: “UK drivers have been deprived of petrol costing just 97ppl. Our members have watched in dismay and complained bitterly as the price of oil has crashed but pump prices have moved very little since Christmas. We now know that savings equivalent to £2.50 a tank are being diluted as petrol commodity prices buck the trend of falling stock market prices and fail to fall in line with oil.

“It has to be realised that supermarket petrol at below £1 a litre in the run-up to Christmas was essentially a special offer: brilliant news for the majority of motorists because it affected virtually all major towns and cities. The key question then was whether other retailers would follow or wait to see if the special offer ended after the New Year.

“Crashing oil prices slowly filtering through to wholesale allowed supermarkets to maintain the £1 a litre on petrol beyond Christmas, and then extend the same price to diesel in the new year. We think that other retailers waited to see if the move was just a festive flash in the pan and, once it was clear it wasn’t, started to cut their margins to close the price gap. Now that wholesale prices have started to trickle down again, the UK average for petrol has started to move closer to the £1 per litre.

“Unfortunately, road fuel at the price of bottled water is some way off because commodity market players and refiners have been soaking themselves in the 30% higher return from converting oil to petrol. This sort of behaviour would be flagged up in the United States and Australia because fuel price transparency is officially sanctioned and reported. In the UK and Europe, pumped-up commodity prices for petrol were highlighted by the AA and motoring organisations in May 2011. Nothing was done by the UK government or the EU – and now it has happened again.”





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Weekly retail fuel prices: 20 November 2017
RegionDieselLPGSuper ULUL
East123.5862.15130.21121.10
East Midlands123.21131.97120.77
London123.5556.90131.47121.21
North East122.7764.90132.16120.46
North West123.1057.80131.29120.64
Northern Ireland121.8564.20125.57120.27
Scotland123.3352.20129.79120.83
South East123.79131.06121.50
South West123.42130.49121.01
Wales123.15129.94120.50
West Midlands122.8761.90132.62120.73
Yorkshire & Humber122.9956.90131.53120.82

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