Petrol stations accused of pocketing fuel duty cut

Petrol stations and retailers have "pocketed" the benefit of a 5p fuel duty price cut, the chair of the Treasury Select Committee has claimed.

Conservative MP Harriett Baldwin accused retailers of not passing on the tax reduction to drivers.

Fuel duty was cut last March, but there were concerns it was not immediately reflected through lower pump prices.

An investigation found the cut had been passed on, but said increased profit margins cancelled out the benefit.

On Monday, the Competition and Markets Authority said supermarkets, known usually to have cheaper fuel prices, had sought to increase profits from selling fuel, increasing their margins by 6p per litre on average between 2019 and 2022.

Its inquiry also found margins on diesel across all fuel retailers had cost drivers an extra 13p per litre during the first five months of this year.

Ms Baldwin claimed that because the profit margins of sellers had been higher, the tax cut on petrol and diesel had "gone straight to the bottom line" of the businesses.

"The thing that annoys me from a Treasury point of view is that the chancellor cut fuel duty by 5p to help families with their cost of living and yet it doesn't seem to have been passed on," she told the BBC's Today programme.

Petrol and diesel prices spiked to record highs in the aftermath of Russia's invasion of Ukraine, but have since fallen back.

The CMA began an investigation after concerns were raised that fuel prices were not falling as fast as they should be in response to the wholesale costs faced by retailers dropping.

The watchdog found supermarkets were still typically the cheapest place to buy fuel, but warned competition between was "not working as well as it should be".

It noted Asda, historically the cheapest for fuel, and Morrisons "made a decision to increase their target margin" on petrol and diesel from 2021, with the largest increase coming in 2022-23.

It said other retailers, including Sainsbury's and Tesco, "maintained largely passive pricing policies", rather than responding to compete with Asda and Morrisons to secure more customers, and "there followed the same trend in prices and margins".

The additional cost to drivers paying at supermarket pumps as a result of the higher margins was estimated to be "around £900 million" last year, the CMA said.

It now plans to force supermarkets and other fuel retailers to publish live prices under a new scheme aimed created more competition to between retailers and reducing instances of overcharging.

But last week, supermarkets bosses, who were quizzed over fuel and food prices by MPs, denied they were making too much money from higher prices.

Morrisons' chief executive David Potts told the Business and Trade committee that the supermarket had passed on the 5p cut to customers "one the same day" it was announced.

He said energy, transport and labour costs had "all added to the oil barrel", but added "we can always do more".

"Right now the prices on our supermarket forecourts are lower than the independents and continue to be so," he said.

The BBC has contacted the Petrol Retailers Association, which represents independent forecourts, for comment.

All supermarkets have backed the idea of a price transparency scheme, similar to the type in place in Northern Ireland, where fuel is cheaper.

However, the CMA has admitted petrol and diesel in Northern Ireland is less expensive than in other parts of the UK because of competition from filling stations in the Republic of Ireland.

How to save money on petrol and diesel

• Watch your speed: The RAC says 45-50mph is the most efficient speed to drive for fuel efficiency

• Switch off the air conditioning: Extra energy is needed to power a car's air conditioning system and turning it on can increase your fuel consumption by up to 10%, according to the AA

• Check your tyre pressure: Underinflated tyres will use up extra petrol. Check your pressures regularly, especially before heading off on a long journey

For more tips click here