Filling a tank for a 55-litre family car, such as a Skoda Superb, now costs more than £100 for petrol and diesel.
7p per litre fuel increase for August
UK petrol prices are continuing to spiral, rising for a third consecutive month. Petrol costs have increased by nearly 7p for August, with the average price of unleaded now costing 152p. Diesel is also up by 8p, climbing from 146p to 154p.
Filling up in August, for a typical family car, was on average, £4.50 more expensive than in July. August’s monthly price rise for petrol was only exceeded by previous months this year, which were greatly affected by the invasion of Ukraine. While diesel’s increase was also surpassed by a few months this year, October 2021 and May 2008.
RAC fuel spokesman, Simon Williams, said: “August was a big shock to drivers as they had grown used to seeing far lower prices than last summer’s record highs.
“Seeing £4 or more go on to the cost of a tank in the space of just a few weeks from a pump price rise of 6-7p a litre is galling, particularly for those who drive lots of miles or run an older, less fuel-efficient car.
“While the increase is clearly bad news for drivers, it could have been far worse had the biggest retailers not let their inflated margins from earlier in the year return to more normal levels as wholesale fuel costs went up.”
Why are fuel prices going up?
According to the RAC’s fuel watch, the rising prices at the pumps are due to OPEC reducing supply.
The price of crude oil has gone up nearly $12 since the start of July to nearly $87 ($86.86) a barrel now.
This led to the wholesale cost of fuel – the price retailers pay – going up, which in turn has been passed on to drivers on the forecourt.
What determines the price of fuel?
The price of petrol and diesel you buy at the pump is largely determined by the wholesale price of Brent crude oil.
Fluctuations in the price of this, however, can take weeks to filter through to the forecourts.
The long-term price of fuel
In July 2023, a major report from the Competition and Markets Authority (CMA) found that drivers paid on average 6p per litre more for fuel last year as supermarkets took advantage of weakened competition and inflated pump prices.
CMA chief Sarah Cardell, who said supermarkets were usually the cheapest place to buy fuel and market anchors, said the rising of prices would have had “a greater impact on vulnerable people, particularly those in areas with less choice of fuel stations.”
The report found the rise was instigated by Asda – which was also fined £60,000 for not co-operating fully with the CMA investigation – and Morrisons, the two cheapest fuel sellers, which last year each made the decision to target higher margins.
Asda’s fuel margin target in 2023 was more than three times what it had been for 2019, while Morrisons doubled its margin target in the same period.
Other retailers, including Sainsbury’s and Tesco, didn’t respond “in the way you would expect in a competitive market” and “instead raised their prices in line with these changes”, the CMA found.
“Taken together, this indicates that competition has weakened and reinforces the need for action,” the report added.
Diesel prices have also been slow to drop in 2023, partially down to Asda ‘feathering’ its prices (reducing them more slowly as wholesale prices fell) and other firms not responding competitively to that.
The CMA estimated that drivers have paid 13p per litre more for diesel from January 2023 to the end of May 2023 than if margins had been at their historic average.
“Competition at the pump is not working as well as it should be, and something needs to change swiftly to address this,” said Cardell.
As such, the CMA recommended a “fuel finder scheme” to give drivers access to live, station-by-station fuel prices on their phones or sat-navs. This would “help revitalise competition in the retail road fuel market.”
Cardell added: “We need to reignite competition among fuel retailers. This [scheme] would end the need to drive round and look at the prices displayed on the forecourt and would ideally enable live price data on sat-navs and map apps.”
The CMA also recommended bringing in a new monitoring body to “hold [the] industry to account.”
On this, RAC spokesman Williams said: “The fact that drivers appear to have lost out to the tune of nearly £1 billion as a result of increased retailer margins on fuel is nothing short of astounding in a cost of living crisis and confirms what we’ve been saying for many years: that supermarkets haven’t been treating drivers fairly at the pumps.
“It’s all about action now, and we very much hope the government follows through with both of the CMA’s recommendations.
“While forcing retailers to publish pump prices is a positive step for drivers, what’s of far more significance is the creation of a fuel-monitor function within government which, we very much hope, actively monitors wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops.
“Without this, we fear drivers will continue to get a raw deal.”
