Probe into possible 'collusion' in rural fuel market launched by regulator

The competition watchdog is to launch a more detailed investigation into fuel prices, which are at record levels.

The competition watchdog is to launch a more detailed investigation into fuel prices, which are at record levels. - Credit: PA

Whether companies are colluding to make fuel more expensive in rural areas is set to be examined by the competition regulator, after causes for concern were discovered elsewhere in the market.

Figures from data firm Experian show the average price of a litre of petrol at forecourts in the east this week was 190.9p, with diesel at 198.6p per litre.

That is an increase of around 60p for petrol and 64p for diesel over the past 12 months.

A recent review into what was causing soaring fuel prices by the Competition and Markets Authority (CMA) found that the increase from the crude oil price when it enters refineries to the wholesale price when it leaves them as petrol or diesel has more than tripled in the last year, from 10p per litre to nearly 35p per litre.

It said that retailers’ margins “remained about 10p per litre on average” over the same period.

The CMA also attributed record fuel prices to an increase in the cost of crude oil.

The regulator noted there are “significant differences” in pump prices between many rural and urban areas – with rural areas typically paying 1p-2p more, but in some areas rural consumers were found to be paying "substantially more".

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At the same time, the report found people in rural areas are more likely to be dependent on cars to get around.

Outlining the reasons for the price differences, the report cited the lower number of supermarket fuel stations which are typically cheaper than other retailers, higher transport costs and lower sale volumes.

It added: "Higher prices may enable some lower volume sites to remain viable in sparsely populated/rural areas."

CMA chiefs also set out how an open data scheme could help consumers shop around local forecourts more easily, something that the report found was key for rural communities.

Sarah Cardell, CMA general counsel, said: "The recent rises in pump prices are a major worry for millions of drivers. While there is no escaping the global pressures pushing up fuel prices, the growing gap between the oil price, and the wholesale price of petrol and diesel, is a cause for concern.

Sarah Cardell, CMA general counsel

Sarah Cardell, CMA general counsel - Credit: CMA

"We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it.

"On the whole, the retail market does seem to be competitive, but there are some areas that warrant further investigation. These include finding out whether the disparities in price between urban and rural areas are justified."

The regulator is now launching a market study that will examine the sector “in more depth”.

This market study is set to analyse why the cost of fuel differs so widely between urban and rural settings. 

Ms Cardell continued: "This area of work is a major priority for the CMA and if we can help, we will. That’s why we are immediately launching a market study that will use our formal legal powers to investigate this in more depth.

"If evidence emerges of collusion or similar wrongdoing, we won’t hesitate to take action."

Paul Simon, head of public affairs and strategic communications at Suffolk Chamber of Commerce

Paul Simon, head of public affairs and strategic communications at Suffolk Chamber of Commerce - Credit: Nicky West Photography/Suffolk Chamber

Paul Simon, head of public affairs and strategic communications at Suffolk Chamber of Commerce, said: “Being a predominantly rural county, the impact of fuel price rises certainly seems to be hitting Suffolk harder than many urban areas.

“While having more easy-to-access price comparison information might help businesses and their staff at the margins, Suffolk Chamber of Commerce believes that only a radical and immediate pro-business programme of cuts to fuel duty and VAT will sufficiently boost the resilience of smaller firms in the county over the short to medium-term.”