Higher rural fuel prices 'are fair'

HIGHER fuel prices paid by rural motorists are not the result of foul play, says the government's competition watchdog.

Petrol is around 1.9ppl more expensive in the countryside than in towns and cities. Similarly, diesel costs around 1.7ppl more when purchased from a rural than urban forecourt.

But the Office of Fair Trading said a number of factors accounted for these differences.

They included lower throughputs per forecourt, fewer competitors – including supermarkets – within a local area, and higher transport costs for getting fuel to rural forecourts.

Ruling out a full-blown inquiry, OFT chief executive Clive Maxwell, said: "We recognise that there has been widespread mistrust in how this market is operating.

"However, our analysis suggests that competition is working well, and rises in pump prices over the past decade or so have largely been down to increases in tax and the cost of crude oil."

The OFT found that the UK had some of the cheapest pre-tax road fuel prices in Europe.

In the 10 years between 2003 and 2012, pump prices increased from 76 pence per litre (ppl) to 136ppl for petrol, and from 78ppl to 142ppl for diesel.

This was caused largely by an increase of nearly 24ppl in tax and duty and 33ppl in the cost of crude oil, said the OFT.

The past decade had also seen the growing influence of the big four supermarkets. They increased their share of road fuel sold in the UK from 29% in 2004 to 39% in 2012.

High throughput per forecourt and greater buying power had allowed the supermarkets to sell fuel more cheaply than other competitors, the OFT said.

In August 2012, for example, the average price of petrol at supermarkets was 2ppl cheaper than the average at oil company owned sites and 4.3ppl cheaper than the average at independent dealers.

The OFT said it recognised that many independent dealers had found it difficult to compete in this sector, with a significant number exiting the market.

Overall, the number of UK forecourts has fallen from 10,867 in 2004 to 8,677 in 2012, although the rate of decline appears to have slowed in the last three years.

In the majority of areas where forecourts closed between November 2011 and August 2012 retail competition still appears to be strong.

The OFT found that petrol and diesel tend to be cheaper in local areas with more local retailers, in particular areas where there are supermarket forecourts, rather than rural areas.

The watchdog also investigated the widely held perception that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops.

It analysed the relationship between retail and wholesale prices at both a national and local market level, but found very limited evidence to support such claims.


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