According to Business Secretary Kwasi Kwarteng, there is “widespread worry” regarding the rate of price increases and public annoyance that a fuel duty drop announced earlier this year was not always being passed on.
The government has ordered the competition regulator to conduct an “urgent” examination of the fuel industry in response to record-breaking pump prices.
Business Secretary Kwasi Kwarteng stated in a letter to the Competition and Markets Authority (CMA) that there is “widespread concern” about the rate of price increases and public dissatisfaction that a reduction in fuel duty announced earlier this year does not appear to have been passed on in all cases.
Mr. Kwarteng has requested an initial report by the 7th of July, as well as a longer-term investigation by the watchdog on how to promote market competition and increase price transparency for customers.
The intervention comes as the average price of filling a typical automobile with gasoline surpassed £100 per gallon last week, adding to the cost of a living squeeze for households already facing rising electricity bills and food costs.
After Russia, a major oil producer, invaded Ukraine, the price of Brent crude surpassed $130 per barrel.
In his letter to the CMA, Mr. Kwarteng stated his fear that prices at forecourts “may not decline as quickly or as much as they climb.”
To mitigate the damage, Chancellor Rishi Sunak reduced fuel duty by 5p per liter in March. Last month, the business secretary wrote to petrol retailers to “remind them of their responsibility” to pass these savings on to motorists.
Mr. Kwarteng stated at the time that the CMA “closely monitored the situation.”
Meanwhile, driver advocacy groups have urged the government to reduce fuel duty further or implement a temporary reduction in fuel VAT.
Drivers should receive a reasonable fuel price.
In his most recent letter, the commerce secretary recognized that global factors such as the Ukraine crisis and the reopening of economies after lockdowns had contributed to the “extraordinary” spike in fuel costs and that the government had responded with a £5 billion aid package.
However, he noted, “Despite this move, there is widespread anxiety about the rate of increase in prices at the pump and the possibility that prices may not decline as quickly as they climb.”
“The British public are dissatisfied that the £5 billion package does not always appear to have been passed on to forecourt pricing, and that in some areas, prices remain higher than in similar, neighboring towns.”
“Drivers should receive a reasonable price for petrol throughout the United Kingdom.
“The key to achieving this is healthy competition between forecourts, with competitors exerting price pressure.
“I am writing to request that the CMA conduct an urgent examination of the fuel market and a longer-term market research.”
“Extremely concerning” fuel price rises
Mr. Kwarteng is requesting “the CMA’s advice on the extent to which competition has resulted in the fuel duty drop being passed on to consumers, and the reasons for local differences in the price of road fuel.”
Andrea Coscelli, chief executive officer of the CMA, stated, “The recent increases in fuel prices are extremely concerning for millions of motorists across the United Kingdom, so we understand the government’s concern regarding the perception that the fuel duty cut is not being passed on to motorists.”
“The CMA is prepared to intervene if competition is not functioning effectively or if proof of illegal anticompetitive collusion emerges.
“We will collaborate with industry, motoring organizations, and the government to ensure that our recommendations to the business secretary are based on factual information.
Anyone with evidence of anti-competitive competition concerns, collusion, or other criminal anti-competitive conduct should contact us.
The CMA can provide advice to ministers, but it cannot compel gasoline merchants to provide information without conducting a formal market study, which can take up to a year.
If following a formal investigation determines that competition legislation has been violated, only then can it impose fines or compel corporations to alter their conduct.
