Are you paying more than you should to fill up?

Drivers have long believed they’re paying more than they should to fill up. As pump prices edge back towards record levels, the politicians and regulators are also growing suspicious. But what’s really causing these price rises? Petrol companies like to tell us that the price at the pump rises when the price they pay for the raw ingredient, oil, goes up. But is that really the case?

Published 19 September 2012:

We’ve got hold of figures that reveal not only what the retailers have been paying for their supply of fuel over the last 18 months but also what they have been charging us during that time.

The figures show that the Libyan crisis in April 2011 caused a spike in world oil prices that caused a sharp rise in the prices at the pumps. This is pretty much as you would expect.

Fast forward to July, however, and it’s a different story. At that time, the economic downturn in Europe caused a big drop in oil prices. But was that reduction passed on to drivers? No – the price of unleaded and diesel barely moved.

Ed King from the AA explains;

“The problem is that when prices go up they go up like a rocket, when they come down they just fall like a feather.”

Continually high prices have taken their toll on drivers who rack up high mileage for their jobs.

Six months ago builder Dennis Stapleton found the cost of his weekly commute had risen to £200. He was spending so much, he decided to take drastic action – and started to sleep in his van.

“I put a bunkbed in the back of my van over my tools and I come down Monday morning with change of clothes, get washed and changed in the evenings, pop out here socially in the evenings, and then go back on a Friday night. It’s the only way I can manage it...I’ve got the inconvenience but I can live with that…I just don’t want to lose all my wages on fuel.”

Drivers like Dennis might have expected some relief during the back half of 2011 because world crude prices dropped steadily from July right through to December. But this didn’t translate to the forecourt. Edmund King from the AA says

“Retailers will say that the price they charge at the pumps isn’t really linked to the barrel price, it’s linked to the wholesale price.”

Unfortunately, the UK petrol retailers don’t like to reveal what this wholesale price is. We asked and they refused to tell us. But earlier this year the AA DID managed to get a hold of some European figures.

They showed that in May, the wholesale cost of oil across the continent fell by 10 pence per litre. But the price at the pump fell by only 6 pence. This failure to pass on the full benefit of wholesale price falls can have huge financial impact.

With individuals, companies and the whole economy hurting, the Office of Fair Trading has begun an investigation into the industry and to find out what petrol retailers are paying for their wholesale fuel.

Ann Pope from the Office of Fair Trading says;

“One of the things we’ll be looking at is how quickly prices change when the wholesale price changes, and in particular if the wholesale price goes down does the price at the pump fall as much or as quickly as the wholesale price has fallen. So that’s an issue we will be considering.”

For some, this can’t come soon enough. 

In Australia, where retailers have had to publish such information since an Oilcode was introduced in 2007, it’s possible for anyone to compare the wholesale and retail costs.

The result? Prices at the pumps are more competitive. In Britain, meanwhile, the misery for motorists goes on.

Company Response

 

The biggest of them are represented by UK Petrol Industry Association, who say that in the light of the OFT looking into this, it’s not appropriate for them to come in and answer questions.

However, they describe fuel retailing in this country as a competitive business, consistently delivering PRE-tax pump prices that are among the lowest in the EU.

They say previous studies don’t support the argument that pump prices rise quickly in response to crude or product price increases, but fall slowly when these prices decrease

They add that information on crude and wholesale petrol and diesel prices IS available to consumers. They’ve suggested a couple of links which you can find on OUR website.