Drivers have been hit by higher fuel prices due to the pound's falling value, according to new analysis. The drop in sterling has added 7p per litre to drivers’ fuel bills over the past year, a review by the Competition and Markets Authority (CMA) has found.
The review found that the “principal drivers” of high fuel costs are rising oil prices and increased profit margins at oil refineries, with the growing cost of oil accounting for around a 20p per litre hike in UK fuel prices in the past 12 months. The drop in the value of the pound compared with the dollar over the same period added a further 7p per litre to fuel bills, which is more than the 5p per litre cut in duty implemented by the Treasury in March.
The CMA found that the growing gap between the price of crude oil entering refineries and the wholesale price of petrol and diesel leaving them accounted for a 24p per litre jump in pump prices in the past year.
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The average price of a litre of petrol at UK forecourts is around £1.62, while diesel is about £1.81 per litre, according to the latest figures. A year ago the prices were £1.37 for petrol and £1.41 for diesel.
Sterling plunged to historic lows against the dollar in the wake of then-chancellor Kwasi Kwarteng’s mini budget on September 23. It has since recovered, but the pound remains around 18 per cent weaker than it was a year ago.
Steve Gooding, director of motoring research charity the RAC Foundation, said the CMA believes the 5p cut in duty was passed on to drivers, but any benefit was "swallowed up" by the pound's fall.
He said there was "little prospect" of another duty cut anytime soon in the current economic climate, adding that if there is one "it would need to be significant in size to make any meaningful impact on pump prices".
Mr Gooding said drivers of diesel vehicles in particular will continue to face high prices for fuel. “While fuel prices have mostly fallen back in recent weeks, rising crude oil prices, an increased refining margin, cutbacks in oil production by Opec (Organisation of the Petroleum Exporting Countries) and yet more turbulence on the currency markets suggest storm clouds on the financial horizon, most acutely for diesel drivers already facing a 20p per litre price premium over petrol," he said.
Earlier this month, the RAC warned that drivers were being denied a further 10p cut in petrol prices due to major retailers hiking profit margins. The RAC said the average price of a litre of the fuel in the UK fell by nearly 7p in September as oil prices plummeted - the sixth biggest monthly drop in average petrol prices since 2000.
However, RAC fuel spokesman Simon Williams said the cut should have been deeper. “Drivers really should have seen a far bigger drop as the wholesale price of delivered petrol was around 120p for the whole month," he said. "Forecourts across the country should have been displaying prices around 152p given the long-term margin on unleaded is 7p a litre."
RAC Fuel Watch data has shown current margins to be around 17p a litre – 10p more than normal. In addition, supermarkets normally charge around 3.5p per litre less than the UK average but are currently only around 1.5p cheaper, the company said.
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