RMI Petrol has claimed that the emergence of two-tier fuel pricing in the UK is severely damaging the independent petrol retailing sector and is calling for another OFT inquiry.
Hypermarkets are now blatantly using fuel as a ’loss leader’ to attract consumers to their stores according to the CEO of one of the big four, claims RMI Petrol, and with overall fuel volumes declining, the independent’s trade is being squeezed with some retailers quoting reductions between 15 and 25% year to date.
Certain oil companies now appear to be responding to this threat by reducing prices on their own forecourts to levels below which they supply their dealers, operating on a solus-tied contract, with the same brand fuel.
The competition authorities have looked into the issue before, and in May 1998, the Office of Fair Trading (OFT) found no competition concerns.
Brian Madderson, chairman of RMI Petrol, said: "RMI Petrol would welcome another OFT Inquiry although we do have real concerns that it will again be too restricted and focus on short-term aspects by concluding yet again that the onward march of hypermarkets selling at below cost, triggering the last remaining big brand oil companies to follow suit, is a perfect example of competition working to the consumers benefit.
“What is really needed is a broader examination which looks carefully at the collateral damage such unregulated pricing is causing to our energy resilience and the wider economy, especially all those SMEs that the coalition government is backing to provide new jobs and the seeds of economic re-growth.
“If the situation is left as it is, there will be irreparable damage to the already struggling independent petrol retail sector with many more going out of business. Since the 1998 OFT Report numbers have dropped alarmingly from over 14,000 forecourts to less than 9,000 today. Site closures have been averaging around 400/500 every year.
"The particular area of concern is the UK’s important rural economies where consumers will have to drive substantially increased distances to fill-up if their local independent petrol retailer is forced out of business."
In a series of BBC news interviews over the bank holiday weekend Madderson explained how he thinks supermarkets are using their size to produce an advantage on the forecourt, leading retailers to claim they are under-charging for fuel.
Madderson said: “We will never have the same prices as the supermarkets – we understand that. But as long as they price fairly – ie not below cost – and provided the oil companies price on their sites at the same level as they’re supplying us (independent retailers), that’s a level playing field and we’re happy to compete.”
Supermarkets have the scale to offer competitive prices, they can also cross-subsidise from one part of the business to the other. However Mark Todd, petrol director at Morrisons, said: “There’s no question of us selling fuel below cost. As wholesale costs have been rising quite steeply in recent months it’s been very competitive at the bottom end and we have been leading prices down. It’s the nature of competition rather than two-tier pricing.”
Meanwhile there has been reporting in the national press that the European Commission has begun an inquiry into petrol pricing amid allegations that the full benefit of recent steep falls in the global price of oil are not being passed on to motorists.
Details of the inquiry emerged in correspondence seen by The Times from Neelie Kroes, the EU’s Competition Commissioner.
In the correspondence, Ms Kroes apparently reveals that the Commission had begun a study of the relationship between wholesale fuel prices and pump prices in European countries, after pressure from the Fédération Internationale de l’Automobile, the European umbrella organisation for motorists’ groups, including the AA and RAC in Britain.