Plan Insurance Blog

Motorists Pay £5m Despite Petrol Prices Drop

The RAC say wholesale petrol prices have dropped since late 2021’s sudden price rise. For some reason, that hasn’t been passed on to consumers. Blame isn’t with global petrol prices, it’s been aimed closer to home.

The end months of 2021 were terrible for motorists. Drivers were stunned at having to pay more for petrol than many had ever had to before. In these challenging times, it’s been calculated that car owners have lost out on an incredible £156 million in total or £5 million each day.

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Blame is being put at the feet of retailers

In December, the price of unleaded petrol dropped by 2p per litre. The accusation by consumer rights groups is that retailers should actually have reduced the cost by 12p. Instead, they kept prices the same. Rather than taking their traditional long-term margin of 6p a litre, retailers took an average of 16p a litre on petrol and 12.5p on diesel.

In tough and uncertain times, drivers have collectively lost out on a staggering large sum of money.

Simon Williams, fuel spokesperson at the RAC, said in no uncertain terms that drivers are ‘being taken advantage of by retailers’. He claimed: “In the past when wholesale prices have dropped retailers have always done the right thing – eventually – and reduced their pump prices’.

Simon says that this time, retailers are capitalising on the media’s coverage of higher energy prices. He believes that many are relying on oil prices rising again, and so are keeping prices high in expectation. Prices at the moment are artificially inflated, creating distrust between retailers and motorists. If wholesale prices do rise again, petrol retailers could acquire a reputation akin to the Boy Who Cried Wolf.

The retailers aren’t admitting wrongdoing

The Petrol Retailers Association (PRA), said that the retail fuel market was ‘extremely competitive’ and that the RAC’s figures overplay how much drivers are suffering due to price increases.

The Chair of the PRA, Brain Madderson, said that he ‘did not condone profiteering’, as petrol prices rose astronomically and filling stations were emptied due to panic-buying. Gordon Balmer, the association’s Executive Director, said that data on December activity is less reliable. Balmer says that this is because data is taken from fuel card transactions, and there are far fewer transactions between Christmas and New Year.

To counter the PRA’s point, the RAC wanted to make clear how the rise increases would affect families. They said that it is costing drivers £6 more to fill up a typical family car than if retailers were to take their standardl 6p margin and pass the savings on to motorists.

That’s No longer Asda Price

A reduction in competition in the petrol forecourt market may also be partially responsible for higher margins. The Times reported in December that Tesco’s head of investor relations had noted “that price competition in fuel pricing has reduced” since Asda’s £6.8 billion takeover by the Issa brothers and TDR Capital. The petrol retailer has subsequently stopped being a price leader on fuel after decades of being the industry’s keenest price setter. The supermarket’s new approach is said to have provided “the whole industry [with] a tailwind”. Ironically this move coincides with the supermarket changing its slogan from “That’s Asda Price” to “Get The Asda Price Feeling.” It’s easy to guess how many motorists would describe their new feelings towards the supermarket chain.

In November 2021, Sainsbury’s replaced Asda as the UK’s cheapest supermarket for fuel for a second month running. According to the RACpetrol was sold at 143.86p a litre compared to 144.73p a litre at Asda.

Are retailers making life harder in uncertain times?

Britain’s households face a financial threat to their living standards. Disruptions of Middle Eastern oil supplies have sent oil prices to their highest level in seven years.

If retailers are already hiking the price of petrol, what will happen to the cost of filling up a car as the wholesale oil costs jump up again? Britain’s struggling households face a further squeeze on their living standards as fears regarding supply disruption in the Middle East sent oil prices to their highest level in seven years.

With the cost of petrol and diesel already close to their all time peak in the UK, the cost of driving is potentially set to rise again after a jump in oil prices to almost $88 (£65) a barrel.

If prices are artificially high now, will petrol prices make driving unsustainable to a significant group of motorists?

Experts say oil prices are only getting higher

Goldman Sachs has reported the price of crude will hit $100 a barrel in the second half of 2022, as the world economy recovers from the disruption caused by the Omicron variant. This would be over a 13% increase on the current cost and the highest price since 2014, They attribute the forecasted jump to pandemic supply restraints.

The investment bank said it expects oil stocks to be at their lowest level in over 20 years in the coming months. They have projected $90 a barrel in the first quarter of 2022, $95 in the second quarter and $100 in the second half of the year.

For many drivers the use of their car is not optional. It is essential to their day to day lives and for many their earnings depend upon it. Navigating this incredibly challenging set of circumstances will not be easy. Sacrifices and lifestyle adjustments will no doubt need to be made and we wish those struggling the best of luck with their efforts to ride out this storm.

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