Petrol retailers urged to pass on fuel duty cut

The government has raised concerns that petrol retailers are not passing on the recent cut in fuel duty, after diesel prices hit another record high.

Business Secretary Kwasi Kwarteng told petrol bosses the competition regulator is monitoring the situation.

However, petrol retailers said their costs had remained high.

The Petrol Retailers Association said margins were "often not enough to cover operating costs".

Chancellor Rishi Sunak implemented the 5p per litre cut in fuel duty in March to reduce the price of fuel for motorists.

In his letter to the industry, the Business Secretary said the public was "rightly expressing concern about the pace of the increase in prices at the forecourt".

He said people were frustrated that the fuel duty cut "does not appear to have been passed through to forecourt prices in any visible or meaningful way".

"It is also unacceptable that different locations even within the same retail chain have widely different prices," he wrote.

Mr Kwarteng said his officials recently engaged the Competition and Markets Authority about the issue, as a result of "perceived intransigence to date".

"I have been reassured that they will not hesitate to use their powers to act against petrol stations if there is evidence that they are infringing competition or consumer law," he said.

After the previous record of £1.79 in March following the Russian invasion of Ukraine, prices dipped but have risen again in recent weeks.

The RAC said petrol prices went up by nearly 3p a litre since the start of May and were £1.66 a litre on average.

It said retailers are taking an average profit of 2p per litre more than before the chancellor's 5p duty cut.

But Gordon Balmer, executive director of the Petrol Retailers Association, which represents independent forecourts, said comparing pump prices against wholesale prices "only gives a partial picture".

Once "additional expenses" such as storage and delivery costs are taken into account alongside the "volatility of product prices", retailers' margins are "often not enough to cover operating costs", he said.

He added that if the government wanted to lower pump prices, it should reduce fuel duty by more than 5p.

"5p per litre did not represent a substantial enough cut to ease the burden of rising prices on motorists," he said.

"While the chancellor was announcing it, oil prices rose and effectively cancelled out the reduction. In addition to this, sales volumes of petrol and diesel are still not back to their pre-pandemic levels.

"Supermarkets and independent fuel retailers are competing vigorously with each other on the thinnest of margins."