2022 ‘the most volatile on record’ for fuel prices, says watchdog as drivers endure ‘terrible year’

CMA blames war in Ukraine and weak pound as it highlights 50p per litre rise and growing gap between petrol and diesel

2022 has been the most volatile year on record for fuel prices, according to the UK’s competition watchdog.

The Competition and Markets Authority (CMA) said that the war in Ukraine and weakness of the pound had made it a “terrible year” for drivers, particularly those who own diesel vehicles. It also said that it had found evidence of “rocket and feather” pricing and that it would be investigation the growing profit margins being enjoyed by some retailers.

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The CMA was tasked with investigating UK fuel prices after concerns emerged that March’s 5p cut in fuel duty was not being passed on to motorists. Now in its “emerging analysis” it has concluded that prices have been more volatile than at any other time on record - rising by 50 per litre between January and June before falling back by 31p for petrol and 14p per diesel.

It also found that the gap in cost between petrol and diesel was at its widest point, with unleaded 24p per litre cheaper on average. It said western Europe’s dependence on imported diesel from Russia but not petrol was largely to blame for the huge gap.

Sarah Cardell, interim chief executive at the CMA, said: “It has been a terrible year for drivers, with filling up a vehicle now a moment of dread for many. The disruption of imports from Russia means that diesel drivers, in particular, are paying a substantial premium because of the invasion of Ukraine. A weaker pound is contributing to higher prices across the board, too.

“There are no easy answers to this. The question for the CMA is whether a lack of effective competition within the UK is making things worse. Although it is only a small proportion of the overall price, the increase in margins for many fuel retailers over the last few years is something we need to investigate further.”

The CMA also found evidence of ‘rocket and feather’ pricing over the last year, whereby prices rise like rockets and fall like feathers, which had particularly happened with diesel. The CMA said it would “investigate this further” but said it had found “no evidence” of this pricing approach before 2022.

The RAC’s fuel spokesman Simon Williams disagreed, saying he believed there was clear evidence of the practice in 2018, 2019 and 2021. He added: “Volatility has unquestionably been an issue in fuel pricing since Russia invaded Ukraine but when wholesale prices trend down for weeks at a time drivers should see pump prices do the same at a similar rate – unfortunately our data shows that this is not often the case. What’s happening now – as it was last December – is a massive downward shift in the price of wholesale fuel with a slow dropping of forecourt prices. Consequently, drivers are set for a more expensive time on the roads this Christmas than it should be.

“The wholesale price of petrol has fallen from 130p a litre at the beginning of October to 109p yesterday – a drop of 21p. Meanwhile, the average price of unleaded at the end of October peaked at 166.88p, but has to date only fallen 8p to 158.91p. Even accounting for the accepted lag for cheaper wholesale prices to filter through to forecourts, this is too slow, particularly as the biggest retailers buy new stock so often. “The situation with diesel is even worse as it has plummeted by 33p over the same period but the average retail price has only come down by 8.4p from 191.12p to 182.71p yesterday.”