Fair competition amongst petrol stations says watchdog 31/1/13
There may be local problems in the fuel supply market in the Western Isles but the
national picture is of fair competition highlighted the Office of Fair Trading (OFT)
as it published a report into pump prices.
Rises in the cost of petrol and diesel over the last 10 years have been caused largely
by higher crude oil prices and increases in tax and duty and not a lack of competition,
it said.
But the OFT is to officially investigate Scottish Fuels practices in distributing
road fuels in the Western Isles and assess if the oil company is abusing its dominant
position by proving rebates and other payments to island retailers.
On a national level the OFT said competition is working well in the UK road fuel
sector, although it has identified an absence of pricing information on motorways
as a concern.
It said it does not rule out taking action in some local markets if there is persuasive
evidence of anti-competitive behaviour.
The OFT found that, pre-tax, the UK has some of the cheapest road fuel prices in
Europe. In the 10 years between 2003 and 2012 pump prices increased from 76 pence
per litre (ppl) to 136ppl for petrol, and from 78ppl to 142ppl for diesel, caused
largely by an increase of nearly 24ppl in tax and duty and 33ppl in the cost of crude
oil.
A key feature of the road fuels sector over the past decade has been the growing
influence of the big four supermarkets. They increased their share of road fuel sold
in the UK from 29 per cent in 2004 to 39 per cent in 2012. The supermarkets' high
throughput per forecourt and greater buying power has allowed them to sell fuel more
cheaply than other competitors.
The OFT recognises that many independent dealers have found it difficult to compete
in this sector, with a significant number exiting the market. Overall, the number
of UK forecourts has fallen from 10,867 in 2004 to 8,677 in 2012.
The OFT found a price gap between urban and rural areas. In August 2012, it said,
petrol was around 1.9ppl more expensive and diesel around 1.7ppl more expensive in
rural areas than in urban areas.
It believes this is due to lower throughputs per forecourt, fewer competitors (including
supermarkets) within a local area, and higher transport costs for getting fuel to
rural forecourts.
The OFT investigated the widely held perception that pump prices rise quickly when
the wholesale price goes up but fall more slowly when it drops. It analysed the relationship
between retail and wholesale prices at both a national and local market level, as
well as the relationship between crude oil prices and wholesale prices at a national
level, but found very limited evidence to support such claims.
Clive Maxwell, OFT Chief Executive, said: 'We recognise that there has been widespread
mistrust in how this market is operating. However, our analysis suggests that competition
is working well, and rises in pump prices over the past decade or so have largely
been down to increases in tax and the cost of crude oil.
'Our call for information has not identified any evidence of anti-competitive behaviour
in the fuel market at a national level, where competition appears to be strong.”
He stressed: “There may be some issues at a local level. Where we receive evidence
of potential anti-competitive behaviour we will consider taking action.”