The Chancellor is painting garages as the villains, but refuses to cancel plans to raise fuel duty
Daily Telegraph 24/03/26
While Donald Trump’s assault on Iran rages on, Rachel Reeves is fighting a battle of her own.
In an effort to appeal to hard-up households and backbenchers, the Chancellor has vowed to stamp out “price-gouging” and crack down on any company seen to be “profiteering” from the conflict in the Middle East.
Her sights so far have been set on petrol station operators, which are increasing prices to combat the soaring price of oil.
Politically, it is a savvy move as she attempts to recast someone else as the villain while refusing to cancel her planned increase in fuel duty.
Ms Reeves told the House of Commons on Tuesday: “Let me say again, this Government will not tolerate any company exploiting this crisis at consumers’ expense.”
However, whether her accusation stacks up is another matter.
Petrol stations are the final step in a long global supply chain.
The fuel pumped into cars on forecourts is delivered from across the world. As a result, it is subject to global prices set by the balance of supply and demand, which has been upended by the war.
Underpinning the price squeeze is Tehran’s effective closure of the Strait of Hormuz, through which around one fifth of the world’s seaborne oil passes.
This block on supplies led to the price of a barrel of crude oil rising from around $70 a month ago to a high of nearly $120, before sliding to around $100 on Tuesday.
And as refineries and suppliers seek fuel, bidding up the price of those oil tankers still able to travel, the cost of petrol and diesel inevitably rises.
So far, it is not obvious that forecourts are ripping drivers off so much as simply passing on the costs they face from global markets.
Figures from the RAC show wholesale petrol prices rose by 17.6p per litre between Feb 27 and March 23. By contrast, retail forecourt prices were up by 13.5p during this period.
Similarly, diesel jumped by 36p per litre during the same period, while the price at the pump increased by a more modest 27p.
That is painful for drivers – but it hardly indicates they are being overcharged by “profiteers”.
The slower pass-through to retail reflects prices at the pump lagging wholesale costs, rather than rising in anticipation of being able to charge drivers more in the future.
Specifically, it shows how fuel companies are not taking advantage of a global crisis to raise charges.
Gordon Balmer, the executive director of the Petrol Retailers Association, says bigger chains can secure cheaper deals with wholesalers to ensure a slower pass-through of costs.
By contrast, smaller operators often have to charge the higher price almost immediately.
“Some larger retailers buy fuel on a three-weekly lagged basis: the average price for the last three weeks applies for their deliveries this week,” he says.
“Some retailers, particularly the smaller ones, have to buy on a daily lag, so the price for petrol and diesel from yesterday’s trades will apply for deliveries today.
“When that happens, in a particularly steep market, with rises like over the past couple of weeks, they have to pass it on – otherwise, they would be selling it at a loss.”
Margins are generally low across the industry, as noted by the Competition and Markets Authority during a review of the petrol market last year.
Its latest report, published in December, found that margins at supermarket stations declined from 10.9p per litre in 2022 to 9.6p last year.
Contrast that with the taxes levied on petrol. Fuel duty comes in at 52.95p per litre. On top of that is VAT, charged at 20pc.
It means the Government takes a bigger share of the price at the pump than anybody else involved in fuel supplies.
Duty is going up by 5p per litre in stages beginning in September, the first increase since 2011.
This is presented as a boost to drivers because previous plans indicated the rise would take place in April, meaning the September date is a five-month delay.
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