Petrol prices fall but drivers still lose out

Published on Thursday 18 August 2011 14:44

DRIVERS in Scotland have missed out on the benefits of a drop in the wholesale cost of fuel, after petrol retailers failed to lower their prices in line with the dip, new figures reveal today.

Motorists are paying more at the pump this month than last - despite a 3p-per-litre fall in the wholesale costs of petrol and diesel for retailers.

Business leaders condemned the lack of responsiveness to price fluctuations, accusing retailers of putting up prices "like a rocket" but allowing them to fall "like a feather".

A report from the AA today shows average petrol prices north of the Border rose to 135.8p per litre in August - up 0.2p from July - pushing the cost of filling an average car's 50-litre tank up to 67.90.

UK-wide, the average price of a litre fell slightly - by almost 1p - but still failed to mirror the slump in the price paid for fuel by garage owners.

Drivers of diesel cars noted a similar hike, which sent the price of a litre in Scotland to the highest on the UK mainland at 140.5p. The UK average cost of diesel also increased slightly, to 139.89p.

The AA called for better transparency in petrol prices - but raised hopes that a price war between supermarkets could result in cheaper fuel on the forecourts.

Price averages by brand show that, on Monday this week, Morrisons and Asda sold the cheapest petrol and diesel in the UK, undercutting rival supermarkets by as much as 2p a litre. Both slashed their prices by 2p last Sunday - followed swiftly by Tesco, which cut its prices on Monday. Most supermarket groups had already cut prices by about 1p days earlier.

"Supermarkets announced that they would be cutting pump prices this week and, hopefully, the drop in wholesale costs will be more properly reflected at the pumps," said Paul Watters, head of AA public affairs.

"However, there is clearly a need for price transparency covering oil, wholesale and retail markets, taking into account the exchange rate. This would allow drivers to see when they're getting a fair price and protect fuel suppliers and retailers from accusations of profiteering."

Between mid-July and mid-August, the average petrol price has risen from 135.62p a litre to 135.71p, while the price of diesel is up from 139.68p to 139.89p.

According to two north-west Europe wholesale petrol price indicators, wholesale prices dipped by at least 6 per cent in the first week of August. With the product cost of UK petrol estimated at about 48p to 50p a litre before duty and VAT, the AA said average UK petrol prices should have fallen by at least 3p.

Historic figures provided by independent petrol retailers' association, RMI Petrol, show wholesale prices and average retail petrol costs can vary greatly. The market has risen fairly consistently for the past year."You can see when it rises, the two lines get closer, whereas when it drops off, they get further apart, and that has been happening for a long time," said an AA spokesman. "But what we've got now is the pump price has got to a point where people are finding it hard to afford it."

Motorists in rural areas such as the Highlands, where there is less competition, are more likely to have to pay higher prices than consumers in towns and cities where larger companies - known as "volume retailers" - push prices lower.

Colin Borland, of the Federation of Small Businesses in Scotland, said: "Petrol prices go up like a rocket when the price of oil rises, but they fall like a feather. At the moment, there is not a lot of spare money around and we're hearing that many companies are seeing petrol prices as a major barrier to them staying in business.

"Until we get some kind of fuel stabiliser in place, cuts in wholesale price should be passed on."

Kate Gibbs, spokeswoman for the Road Hauliers Association, said: "Any decrease in cost must be passed on to the customer. Every drop is critical to us as road hauliers. If the cost is passed on to us, we have no-one else to pass the cost on to. An increase in petrol prices means an increase in the goods on the supermarket shelves."

Neil Greig, of the Institute of Advanced Motorists, warned that lower prices in rural areas could force some independent retailers out of business. It is thought some fuel retailers have suffered a drop in volume sales of about 20 per cent and are running on margins of about 5p a litre.

Before the last general election, campaigners put pressure on the government to introduce a subsidy for drivers living in rural areas. "It is time we started thinking about the rural subsidy again," Mr Greig said.

Brian Madderson, chairman of RMI Petrol, said: "We have seen a bit of a crazy month. We really saw a huge seesaw effect in the price of crude oil. I do agree that for a brief time, wholesale prices did come down by around 3p a litre, but that was not constant.

"The likes of Asda and Tesco are using petrol as a loss leader to get shoppers to come in. We independents, of which there are around 900 left in Scotland now, have been caught in the cross-fire and just cannot keep up."