British motorists have been left short-changed to the staggering tune of £5 billion over the past three years, as fuel retailers have failed to pass on significant savings from falling global oil prices. This revelation comes from a major new analysis that accuses the industry of keeping pump prices artificially high.
The Great Fuel Price Disconnect
According to a detailed report from the RAC Foundation, published on Monday, 16 December 2024, there has been a persistent and growing gap between the cost of oil on international markets and the price drivers pay at forecourts. The study, conducted by the Centre for Economics and Business Research (Cebr), scrutinised pricing data from 2022 to the end of 2024.
The research highlights a fundamental breakdown in the traditional link between crude oil costs and retail fuel prices. While oil prices have fallen substantially from their peaks, the savings have not been fully transferred to consumers. The report suggests that if retailers had passed on cost reductions in line with historic trends, the average price of petrol could be around 10p per litre cheaper than it currently is.
Anatomy of a £5bn Overcharge
The £5bn figure represents the cumulative extra cost borne by UK drivers since the start of 2022. This period followed the extreme price spikes triggered by Russia's invasion of Ukraine, but the analysis indicates that pricing did not normalise as wholesale costs eased.
Steve Gooding, director of the RAC Foundation, was unequivocal in his assessment. He stated that the findings reveal a market that is not functioning competitively for consumers. "The link between the falling price of oil and the cost of filling up our vehicles has been severed," Gooding said. He argued that while volatility in oil markets can explain some price fluctuations, it does not justify the sustained overcharging observed.
The report points to several potential factors behind this trend, including increased retailer margins, a reduction in competitive pressure on forecourts, and the cost of the UK's fuel supply infrastructure. However, the net effect is a significant financial burden on households and businesses already grappling with a broader cost of living crisis.
Industry Response and Regulatory Scrutiny
The report is likely to intensify calls for greater scrutiny of the fuel retail market. The Competition and Markets Authority (CMA) has previously investigated the sector and found evidence of weakened competition, leading to higher prices. In a notable move last year, the CMA recommended the creation of a new, open-data scheme for fuel prices to help drivers find the best deals and stimulate competition.
Representatives from the fuel retail industry have historically defended their pricing, citing a wide range of costs beyond just the wholesale price of oil. These include refining costs, distribution, taxes, and the substantial operational expenses of running forecourts. However, the scale of the discrepancy identified by the RAC Foundation's analysis suggests these explanations may not fully account for the multi-billion pound gap.
The persistent high prices have real-world consequences. For the average driver, the extra cost translates to hundreds of pounds more per year spent on fuel. For logistics companies and small businesses reliant on vehicles, the impact on operating costs is even more severe.
As 2024 draws to a close, the report serves as a stark reminder that the relief from sky-high energy costs experienced in other sectors has not fully materialised on Britain's forecourts. The question now is whether this new evidence will prompt more decisive action from regulators to ensure a fairer deal for the nation's drivers.
