In the wake of weeks of senior politicians accusing petrol station operators of ‘price gouging’ and ‘ripping off’ consumers, a major new study has uncovered no evidence of unfair pricing practices amongst UK forecourt firms.
The Times assessed data from 6,245 of the UK’s c8,300 sites, comparing their prices from before the latest conflict began to now and finding that, on average, retailers had increased the cost of unleaded by 12.1%, against a wholesale cost rise of 18%.
Diesel pump prices rose by an average of 22.7%, and while the paper did not share a wholesale cost for comparison with the fuel, the RAC Foundation indicates B7 diesel wholesale prices rose from around 104ppl at the start of the Iran war, to over 150ppl in mid-March, indicating retail increases have been dwarfed by wholesale hikes.
The paper found 554 forecourts, or 9% of those analysed, had increased their prices by 30% or more, but added: “Those petrol stations that increased their prices the most tended to be those that started with lower prices”.
As well as meticulously dismantling longstanding cliches circulated by everyone from the Prime Minister and the Chancellor, to the Competition and Markets Authority and the RAC, The Times’ investigation highlights a number of aspects that are often overlooked when fuel retailers make the news.
The paper describes, for example, the different buying habits and powers smaller forecourt firms have compared to larger ones, thus explaining much of the variation in retail prices drivers see.
The report also puts paid to the oft-cited ‘rocket and feather effect’, which asserts that in the search of maximum profits, retailers are quick to increase pole prices when wholesale costs rise, and slow to reduce them when they fall.
Instead of quoting this simplistic paradigm, the paper cites Dr Nikhil Datta of Warwick University, who describes that retailers’ margins may shrink during sharp oil-price rises to avoid price-shocking customers, before maintaining a higher margin than average after the market settles down again, thus preserving their average profits over a longer period, while also acting as a buffer for the market.
Steve Gooding, director of the RAC Foundation (not to be confused with the RAC), told the paper: ”It is worth remembering that half of what we pay at the pumps is headed straight for the chancellor’s coffers in the form of tax”, while the Petrol Retailers Association’s head Gordon Balmer said he is “not going to allow politicians to make scapegoats of forecourt operators by making inflammatory and unjustified accusations of profiteering”.
Forecourt Trader’s own Juliet Morrison, meanwhile, highlighted that the volatile oil market was putting forecourt firms and their staff “in a very difficult position”.
