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Wholesale price transparency offers the best way forward to inform the consumer and protect the retailer
As UK pump prices sit stubbornly within 4p of the record prices earlier this year, the UK industry’s boast that it sells the cheapest petrol before tax has been severely dented by the impact of fuel price regulation on the Continent, the AA Fuel Price Report has uncovered
Since the start of October last year, fuel price-regulated Austria has undercut the UK’s average pre-tax petrol price during 25 of the past 52 weeks. During a further three weeks, Austria has been just above what UK supermarkets and other retailers charge on average before tax.
The impact of fuel price regulation is all the more remarkable when considering that, with wholesale fuel traded in dollars, the pound’s stronger dollar exchange rate put eurozone fuel retailers at a significant disadvantage. Had the euro been stronger, the Austrian price would have undercut the UK’s even more. This pattern mirrors the Australian experience where price-regulated Western Australian cities were selling fuel 5% cheaper than unregulated cities elsewhere in the country.
Across the UK, the average price of petrol has fallen just 1.26p a litre, from 140.21p in mid September to 138.95p now. This is despite a 3p-a-litre price cut by Asda in the last week of September, which helped to push average UK petrol prices down by a penny before hitting a two-week plateau.
Diesel drivers fared even worse over the month with the average price dropping from 144.60p a litre mid last month to 143.74 now – down just 0.86p a litre, despite two supermarkets dropping their price by 2p over the past month. Asda once again stands out as significantly cheaper than its rivals.
Heading into winter, pump prices that continue to stay in touch with mid-April’s records of 142.48p for petrol and 147.93p for diesel herald more pain for family budgets as longer and colder nights push up car fuel consumption. However, petrol prices are forecasted to fall as much as 4p a litre in the coming weeks.
Refiners have been enjoying ‘unseasonably strong’ margins, inflated by speculation on the impact of oilfield and refinery maintenance. However, rising petrol stockpiles and falling demand in the US have triggered expectations of a significant fall in the wholesale petrol price and savings for UK petrol car owners within weeks.
if the Austrian success is repeated in Germany and France, both considering price regulation, pressure would grow for the UK to overcome its lack of enthusiasm for regulation
Edmund King, AA president
“The UK fuel industry’s main shield against criticism of high prices has been that it sells the cheapest petrol in Europe before tax. Fuel price regulation established in Austria over the past year has blown a hole in that defence. On average, over the past 12 months, petrol prices in Austria were only half a penny more expensive, meaning that they would have wiped the floor with the UK had the euro been slightly stronger against the dollar,” says Edmund King, the AA’s president.
“Austria’s change in fortunes doesn’t mean the AA believes the UK should rush headlong into setting an official framework for competitive pricing at the pump. However, it does raise questions as to how well pump pricing in this country serves the interests of the consumer – the fuel price postcode lottery and the summer-long inflated price of diesel being cases in point.
King adds: “Wholesale price transparency offers the best way forward to inform the consumer and protect the retailer. Even so, if the Austrian success is repeated in Germany and France, both considering price regulation, pressure would grow for the UK to overcome its lack of enthusiasm for regulation and follow suit.”
“Making public the general movements in the wholesale price of petrol and diesel over a week will indicate to drivers and business whether retailers will or should shortly be lowering or raising their prices. They may not all adjust their prices at exactly the same time but the information will inform consumers to be more alert to local pricing practices when wholesale prices move.”
Regionally, stagnant fuel prices have evened out much of the regional differences. Petrol in Northern Ireland (139.4p), at least a penny more expensive than anywhere else in the UK last month, shadows Wales (139.2p) and the South West (139.2p). Yorkshire and Humberside (138.7p), normally the bastion of cheap prices in the UK, finds itself narrowly ahead of Scotland (138.9p) and East Anglia (138.9p). Astoundingly, it is knocked off the top spot by London (138.6p) – a year ago, London was almost 2p dearer (133.7p v 135.6p).
Yorkshire and Humberside maintains its diesel price pre-eminence at 143.2p a litre, although London again runs it close at 143.4p. The most expensive region for diesel is shared by Northern Ireland, Scotland and Wales, all averaging 144.1p
(19 October 2012)
Fuel price data supplied by Experian Catalist