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Out-Law News 2 min. read

CMA opens in-depth study into UK road fuel market

The UK’s Competition and Markets Authority (CMA) is to conduct an in-depth study of the road fuel market.

The announcement of a market study comes after the CMA completed an initial review of competition in the fuel retail market – a review it undertook at the request of business secretary Kwasi Kwarteng following a rise in the cost of fuel for motorists.

The CMA’s review found that gap between the crude oil price and the wholesale price of petrol and diesel more than tripled from 10p to 35p in the last year, while, over the same period, the difference between the wholesale price and the price charged to motorists was 10p on average. The CMA said that, while prices had fluctuated and the difference between the wholesale price and the price at the pump had risen recently, pricing by retailers “has not been a significant contributor to the overall rise in pump prices”.

The CMA found that the 5p per litre fuel duty cut announced by then UK chancellor Rishi Sunak in March had, in general, been passed on to motorists by retailers.

“The price rises have been driven principally by rising crude oil prices and refining spreads, as opposed to a growing gap between wholesale and retail prices,” the CMA said in its report. “In this context and given that wholesale cost changes are passed through to retail prices with a lag, and thus smoothing any short-term reductions, it can be expected that the duty cut only led to a temporary reduction in prices at the pump, and that this reduction appears to be not full because it is simultaneously offset by other components of the wholesale cost.”

The CMA said its market study (2-page / 96KB PDF) will look in more detail at the relationship between wholesale and retail prices in the market, as well as “the upstream (wholesaling and refining) elements of the supply chain”.

The CMA said it intends to make “full use of its compulsory information gathering powers” in that study. An interim report from the study is due to be published in the autumn. The CMA has until 7 January 2023 to decide whether to make a market investigation reference – a decision that would result in a more detailed examination of whether competition in the market is working well. The deadline for publication of the CMA’s final market study report is 7 July 2023, though it said it is aiming to complete its study before then.

Businesses and other stakeholders have until 1 August 2022 to proactively share comments and evidence with the CMA (13-page / 260KB PDF) for the market study.

In a letter (1-page / 89KB PDF) responding to the CMA’s announcement, Kwarteng said: “While the CMA’s work will be carried out independently, I reiterate that my department’s resources will be fully available to support the CMA with this work.” He added that the government will “give careful consideration” to recommendations the CMA makes stemming from its market study.

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