Soaring fuel prices blamed on tripling of oil refinery profit margins

Soaring fuel prices have been caused partly by a tripling of the profit margin that refineries collect when they process crude oil into petrol and diesel, an investigation has found.

The competition watchdog said it had opened an in-depth probe into the fuel market after its initial review found "cause for concern".

Motorists have been hit with record prices at the pumps this year after the war in Ukraine caused disruption to oil supplies. While oil prices have begun to fall this week in response to growing fears of a global recession, prices on petrol station forecourts have remained high.

The government ordered the Competition and Markets Authority to look into allegations of profiteering by retailers. Its preliminary investigation found that the gap between the price of unrefined oil compared to petrol and diesel had more than tripled from 10p per litre to nearly 35p per litre in the past year.

Retailers’ margins had remained steady at about 10p per litre, the CMA said.

The so-called "refining spread", and higher crude oil prices, were the key drivers of higher fuel costs.

A 5p-per-litre fuel duty cut had been passed on to consumers, the CMA found.

Figures from data firm Experian show the average price of a litre of petrol at UK forecourts on Thursday was 190.8p, with diesel at 198.6p per litre. Petrol prices have jumped 60p and diesel 64p over the past 12 months.

The CMA also confirmed that there are “significant differences” in pump prices between many rural and urban areas.

The regulator vowed to use its legal powers to compel firms to hand over information and said it expects to publish the results of its in-depth review this autumn.

CMA general counsel Sarah Cardell said: “The recent rises in pump prices are a major worry for millions of drivers.

“While there is no escaping the global pressures pushing up fuel prices, the growing gap between the oil price and the wholesale price of petrol and diesel is a cause for concern.

“We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it. On the whole, the retail market does seem to be competitive, but there are some areas that warrant further investigation.”

RAC fuel spokesman Simon Williams said: “We are particularly pleased to see that the CMA acknowledges the gap between wholesale and retail prices has been widening in recent weeks.

“Regardless of the reasons for wholesale prices being what they are, we continue to believe there is clear evidence, not least in the last week, that major retailers are incredibly slow to pass on falling wholesale costs, yet quick to pass on rising ones.

“The idea of allowing drivers to more easily compare pump prices near them may also prove beneficial.

“The question drivers may have, however, is how long the review will take and, crucially, when they might see a change to what they pay every time they fill up."