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The UK competition watchdog launched a road fuel market research on Friday to understand how to lower retail prices for gasoline and diesel.
It’s coming as June gasoline prices saw the biggest monthly rise in 22 years.
The Competitive Markets Authority (CMA) said the study provides more detailed insights into work at all levels of the fuel supply chain, including refining, wholesale and retail.
This investigation was started when the CMA published the report (pdf) A one-month review of fuel prices requested by Executive Secretary Kwasi Kwaten.
According to the review, the fuel tax of 5 pence per liter, which was reduced in March, seems to have been passed on to customers, but the main factors for the price increase are the rise in crude oil prices and the “refining spread”, that is, the refinery. Wholesale prices of crude oil entering and gasoline and diesel leaving them.
There are some regional differences in retail prices, but they do not contribute significantly to the overall price increase.
According to reviews, the dollar-denominated rise in crude oil prices contributed to about one-third of the rise in road fuel prices (20 pence per liter over the past year, adding to the depreciation of the pound sterling over that period. It was 12 percent (7 pence per liter).
According to reviews, widening refining spreads accounted for just over 40% of the rise in road fuel prices (24p per liter) over the past year.
This may be due to both the surge in post-pandemic demand for COVID-19 and the stagnation of refining capacity during the pandemic.
On March 23, the Treasury reduced fuel taxes by 5p per liter. According to the CMA, tariffs are levied when fuel leaves the refinery or coastal terminal.
This means that retailers have an amount of inventory paid at higher tariff rates, even when tariff reductions are implemented.
However, supermarkets cut prices by just over 5p per liter shortly after tariff cuts. The CMA said it is likely to incur costs.
Other fuel retailers have also reduced prices by about 3.5 liters per liter on oil company-operated sites and 2.1 liters per liter on independently operated sites in the days following the tariff cut.
However, the impact of the May tariff cut was swallowed mainly by oil prices and refining spreads.
The CMA said it found that in some parts of the UK, drivers face higher prices than in other areas, such as urban and rural areas.
Fuel prices tend to be higher in less competitive regions, but the difference may also reflect the higher costs of supplying retail fuel to certain regions.
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Lily Zhou is a freelance writer who mainly covers the British news of The Epoch Times.
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