OFT launch competition inquiry into petrol and diesel prices

The Office of Fair Trading (OFT) has launched an investigation into the cost of petrol and diesel for UK motorists.

The OFT said the roads fuel industry was worth £32 billion and that petrol prices have risen by 38 per cent since June 2007, whilst diesel prices have seen a 43 per cent increase over the same five-year period to June 2012.

The OFT will investigate whether competition is being curtailed in the UK market and whether cuts in the wholesale cost of crude oil are being passed onto UK motorists.

It also wants to find out if price co-ordination in markets is a problem in Britain as it has been identified by other countries.

Consumers in the UK have faced record fuel prices at a time when household incomes are being stretched as net incomes fall and the country remains in a double-dip recession.

Prices could be worse if the government had not postponed a planned 3p a litre rise in fuel duty from August to January 2013.

It is estimated that 60 per cent of the price paid at the pumps by British motorists is tax. The review will not be looking at this element of the total cost.

The OFT is to investigate if reductions in the price of wholesale oil prices have been passed onto consumers at the forecourt. It is not a full-scale investigation at this stage, the OFT says it is “to take a broad based look at this sector.”

The OFT is looking to identify whether there are competition issues that need investigating in the sector.

It will put together information over the next six week and publish its findings in January. It will consult the fuel industry, consumer groups and motoring organisations to canvass a wide range of views. if it believes the industry has a case to answer it could issue fines to companies or refer the issue to the Competition Commission.

Claire Hart, Director in the OFT's Services, Infrastructure and Public Markets Group, said: “We are keenly aware of continuing widespread concern about the pump price of petrol and diesel and we have heard a number of different claims about how the market is operating.

“We have therefore decided to take a broad based look at this sector, to provide an opportunity for people to share their concerns and evidence with us. This will help us determine whether claims about competition problems are well-founded and whether any further action is warranted.”

The OFT wants to find out if supermarkets and major oil companies are undermining independent retailers efforts to compete in the sector and if there is enough competition in remote parts of the UK.

AA President Edmund King said the OFT investigation was “overdue.” Two weeks ago the motoring organization warned that petrol prices could once again reach a record high very shortly after they rose by 2.5p a litre in just a month to reach an average price of 135.5p a litre after falling by 8p a litre in two months.

The latest figures from Experian Catalist reveal that the average cost of a litre of unleaded petrol was 138.99 pence on Tuesday. The average price of a litre of diesel was 143.52 pence.

Meanwhile, last month a separate report commissioned by the G20 group of countries concluded that the market is wide open to “manipulation or distortion”. It operates in a similar way to the Libor rate and incentivizes traders to distort figures to increase trade.

Special Infographic: Breaking down the cost of UK fuel - From the source to the pump

A Department for Transport spokesman said: "We welcome the OFT's decision. Many motorists are concerned about fuel prices and that when crude oil prices fall, this isn't seen at the pump as quickly as consumers would like. We look forward with interest to the findings of the study."

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