UK launches probe into road fuel pricing over growing 'refining spread'

The UK's competition watchdog plans to review of the retail road fuel market after finding 'cause for concern' over a growing gap between crude prices and wholesale oil product prices leaving refineries, it said July 8.

The 'refining spread' between crude and wholesale prices added 24 pence/liter (28 cents/liter), or 40%, to fuel costs in the UK over the past year, the UK Competition and Markets Authority said, after an initial review into pump prices requested by the government last month due to concerns over profiteering.

The CMA said the dollar-terms increase in oil prices over the past year accounted for around a third of the rise in road fuel prices, while the fall in the value of pound in the added a further 12%.

"Both increased demand post-COVID-19 recovery and reductions in supply (in particular due to the Russian invasion of Ukraine and the mothballing of refining capacity during COVID-19) appear to have played a role in driving up the refining spread," the CMA said.

"In light of some of the concerns found and the urgency of the situation, the CMA has today launched a market study that will examine the road fuel market in more depth, making full use of its compulsory information gathering powers," it said, adding that an interim update will be published in the autumn.

It noted, however, that retail fuel margins have remained about 10 p/liter on average.

Global fuel prices have soared to record highs on the back of Russia's war in Ukraine, low stocks and a lack of global refining capacity, triggering concerns over demand destruction for a key component of the refined crude barrel.

Average UK pump prices for diesel and unleaded gasoline were close to record highs at GBP1.9884/liter and GBP1.9127/liter, respectively, on July 7, according to automotive services company RAC. Record high fuel prices have also been seen at the pumps in the US and Europe.

Platts Analytics currently estimates that the UK's gasoline and diesel demand will grow to an average of 264,000 b/d and 600,000 b/d, respectively, in 2022, compared with 285,000 b/d and 655,000 b/d in 2019.