What determines the price of fuel?
The price of petrol and diesel you buy at the pump is largely determined by the wholesale price of Brent crude oil.
Fluctuations in the price of this, however, can take weeks to filter through to the forecourts.
The price of crude oil has gone up nearly $12 per barrel since the start of July to around $96 in October and now fallen to around $78.
The long-term cost of petrol
In July 2023, a major report from the Competition and Markets Authority (CMA) found that drivers paid on average 6ppl more for fuel in 2022 as supermarkets took advantage of weakened competition and inflated pump prices.
CMA chief Sarah Cardell, who said supermarkets were usually the cheapest place to buy fuel and market anchors, said the rising of prices would have had “a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.”
The report found the rise was instigated by Asda – which was also fined £60,000 for not co-operating fully with the CMA investigation – and Morrisons, the two cheapest fuel sellers, which last year each made the decision to target higher margins.
Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled its margin target in the same period.
Other retailers, including Sainsbury’s and Tesco, didn’t respond “in the way you would expect in a competitive market” and “instead raised their prices in line with these changes”, the CMA found.
“Taken together, this indicates that competition has weakened and reinforces the need for action,” the report added.
Diesel prices were also slow to drop in 2023, partially down to Asda ‘feathering’ its prices (reducing them more slowly as wholesale prices fell) and other firms not responding competitively to that.
