The Competition and Markets Authority (CMA) has warned fuel retailers it will be closely monitoring pump prices amid concerns that weak competition continues to keep fuel margins at historically high levels, even as wholesale costs and supply conditions begin to stabilise.
In its latest road fuel monitoring report, published on Monday, the watchdog said the recent conflict in the Middle East had been the primary driver behind higher pump prices, with elevated wholesale fuel costs accounting for most of the increases seen in March and April.
However, the CMA said average fuel margins across both supermarket and non-supermarket retailers remained high during the period, reaching 11.3 pence per litre in April, with some individual retailers increasing margins despite improvements in inventory levels and a slowdown in wholesale price rises.
The regulator said it had found no evidence that retailers had deliberately altered pricing strategies to exploit the geopolitical crisis. Instead, higher margins at some sites reflected a combination of factors, including retailers following competitors’ price increases, managing supply constraints and inventory pressures, and differences in fuel purchasing costs.
Nevertheless, the CMA said it remained concerned that the sector continues to exhibit the weak competitive dynamics identified in its 2023 fuel market study, with many retailers adopting passive pricing approaches that align with local competitors rather than actively competing for customers.
“Given the improvements to supply conditions seen in April – in particular improved inventory levels and with wholesale prices no longer increasing – the CMA would be concerned if current high retail prices persist,” the report stated.
Sarah Cardell, chief executive of the CMA, said: “We know prices at the pump are putting real pressure on drivers’ pockets. While our analysis shows the rise in wholesale prices is the main reason for higher fuel prices, we remain concerned about weak competition in the sector leaving drivers paying more.
“Retailers should be in no doubt that we are continuing to monitor prices and margins closely and expect any reductions in wholesale prices to be rapidly and fully passed on to drivers.”
The report also reiterated that supermarkets remain, on average, the cheapest fuel retailers and continue to lead the market on price, while motorway service stations remain the most expensive, charging a significant premium compared with other forecourts.
The CMA highlighted the role of the new Fuel Finder scheme, which aims to increase transparency and competition by enabling motorists to compare fuel prices more easily through navigation apps and price comparison services. According to the regulator, drivers could save as much as £9 per tank by shopping around.
The CMA plans to publish its next fuel market update in August, covering developments through to the end of June. It said the longer reporting period should provide a clearer indication of whether reductions in wholesale costs are being passed on to consumers.
Separately, the regulator will engage directly with fuel retailers as part of a more detailed assessment of pricing strategies across the sector. The results of that review are expected to be published in the autumn and will include an evaluation of the impact of the Fuel Finder initiative on market competition.