June 2014 fuel price update

Diesel drivers pay the price for cheaper petrol

Diesel drivers pay the price for cheaper petrol

Diesel drivers pay the price for cheaper petrol

Diesel drivers in the UK are paying up to 3p a litre more than they should for their fuel, research for June’s AA Fuel Price Report indicates. Not only is that taking up to £1.5 million a day extra from diesel drivers’ pockets, but the inflated cost of business transport is passed on to their customers and then non-motoring consumers.

Pump prices for mid June average 130.47p a litre for petrol and 135.70p for diesel. A month ago, the fuels averaged 129.92p for petrol and 136.26p for diesel.

The crisis in Iraq has helped to lift the price of oil from around $109 a barrel at the beginning of June to above $113 at the beginning of this week. However, much of the potential to push up wholesale prices was offset by a stronger pound breaching the 52-week high against the dollar, after the Bank of England’s governor hinted at an interest rate rise.

Price-gap

Latest pump prices have created a price-gap between petrol and diesel of 5.23p a litre, despite the gap at wholesale price level averaging just 0.8p over the past month. Compared to neighbouring countries, EU commission statistics show the UK’s failure to pass on the near-parity of wholesale petrol and diesel prices to drivers at the pump.

While diesel drivers in the UK have lost out because fuel suppliers and retailers have increased their margins by not passing on more of the cheaper wholesale costs, petrol drivers have benefited from lower margins on theirs.

By subtracting tax (VAT and fuel duty) and the wholesale cost from the pump price, AA analysis finds the remainder (profit margins and other costs of suppliers and retailers) averages:

April to mid-June 2013 – petrol 6.02p a litre, diesel 7.66p a litre

April to mid-June 2014 – petrol 4.98p a litre, diesel 8.20p a litre

Charging less for petrol

In effect, suppliers and retailers are charging 1p a litre less to provide petrol at UK pumps this summer while the fuel industry has increased how much it takes from diesel drivers after tax and product cost.

With diesel at the pump costing 5.23p a litre more than petrol, the current price gap breaks down as follows:

  • 1p accounted for by the suppliers and retailers reducing their take from the pump price of petrol
  • the wholesale cost of diesel being between 0.5p and 1p a litre more expensive than petrol
  • adding 20% VAT accounts for a further 0.4p a litre

This has left UK diesel drivers paying on average around 3p a litre more than they should be at the pump.

£1.48 million a day

Department of Energy and Climate Change figures show that between April and June of last year, UK retailers sold 3.75 million tonnes of diesel (1.577 from supermarkets, 2.173 from non-supermarket forecourts). That equates to almost 4.5 billion litres or 49.4 million litres a day.

The 3p-a-litre diesel price rip-off means that UK diesel drivers are overpaying by as much as £1.48 million a day. Diesel surcharges added by haulage and delivery companies, and usually calculated on the average UK pump price, are being inflated. These are passed on rapidly to customers, and eventually consumers.

Graph comparing diesel and petrol margins

Diesel distortion

the pumped-up price of diesel so far this summer is hitting 35% of UK car owners and is inexcusable

Edmund King, AA president

Siphoning off the savings

“The pump price battleground is usually centred on petrol, the UK’s headline car fuel. However, the pumped-up price of diesel so far this summer is hitting 35% of UK car owners and is inexcusable. Neighbouring European countries have passed on the benefit of lower diesel wholesale costs to their drivers while the UK’s fuel industry has chosen to siphon off the savings,” says Edmund King, the AA’s president.

“It has long been known that, for short periods, diesel margins can be a penny or so higher than petrol. Yet greater local price competition, more miles to the gallon and a longer time between fill-ups has meant that the diesel mark-up has gone largely unnoticed. This summer the gap is too big, gone on for too long and is therefore even more unfair. Additionally, with businesses passing the higher diesel costs for transport and deliveries direct to their customers, the inflated pump price is hurting non-drivers as well.

“Plummeting sales this spring have inspired retailers, particularly supermarkets, to cut their margins on petrol, and this is very welcome. But this shouldn’t be done at the expense of diesel drivers.”

National and regional

Regionally, the North sells the cheapest petrol at an average of 130.1p a litre. Northern Ireland, despite being the only part of the UK not to see the average petrol price rise, remains the most expensive at 131.3p a litre. London sells the cheapest diesel, averaging 135.4p a litre, while Scotland sells the dearest at 136.3p.


(20 June 2014)

Fuel price data supplied by Experian Catalist

Wholesale price data provided by fuelpricesonline.com

 

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