Coronavirus: Drivers being 'ripped off for petrol'

By Simon Read
Business reporter

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Image source, Getty Images

Motorists are being ripped off by petrol companies, the AA has claimed, as falling oil prices are not being reflected at the pump.

The motoring group calculates drivers are overcharged by more than £5 a tank.

"Questions will be asked about the fairness of pump prices during the great oil crash of 2020," the AA said.

Brian Madderson, chairman of the Petrol Retailers Association, told the BBC that independent retailers are "struggling to survive".

The price of oil has crashed in recent days, leaving the wholesale price of petrol bobbing around the 16p a litre mark, according to the AA.

But the average pump price for unleaded has remained around the £1.10 mark, inching only slightly below that this week.

While the bulk of that price is made up of tax, the AA reckons average pump prices should be about £1.

Each litre sold of petrol includes fuel duty at 57.95p a litre - the retailers' margin - plus VAT.

The AA reckons petrol sellers should be happy with a margin of 9p a litre, which would make the average pump price of petrol around £1 a litre when the wholesale price is 16p.

"Instead, the average pump price is higher because retailers say they need to charge 10p a litre more to offset the lower volumes of fuel they are selling," said the AA's fuel spokesperson Luke Bosdet.

But Mr Madderson argues that the current crisis is not a normal trading environment. "It's a once-in-a-lifetime trading situation where independent retailers are seeing volumes down by up to 85%," he said.

If independent garages took a small margin, many of them would go to the wall, he warned.

"Many [independent garages] are the only option in rural areas which means they are essential in helping to keep key workers on the road."

He also pointed out that many are selling petrol they bought at the beginning of April, when oil was more expensive.

'Ripping off drivers'

Campaigners warn that high taxes, which causes high-priced petrol, leads to drivers having to pay more than they should.

"The immoral fuel supply chain has been ripping off drivers to the tune of more than £20m per day," said Howard Cox, founder of the FairFuelUK campaign.

"Our essential workers need honestly-priced fuel, so they are not under even more financial pressure to help us all."

Tory MP Robert Halfon said the big oil companies should do their bit to help: "They must help the government cut the cost of living and pass on quickly the fall in international oil prices to drivers.

"When the coronavirus is over, those who profiteered unnecessarily, will face harsh consequences."

Image source, Getty Images
Image caption, Social distancing measures are now in operation at petrol stations in the UK

Petrol prices are cheapest at supermarkets where chains keep prices low to attract shoppers into their stores.

Some supermarkets have sold petrol at about £1 a litre in recent days, but independent garages can't afford to join the price war.

"In theory petrol prices could fall below £1 per litre if the lower wholesale costs were reflected at the pumps, but at the same time people are driving very few miles, so they're selling vastly lower quantities of petrol and diesel at the moment," pointed out RAC fuel spokesman Simon Williams.

"We are concerned about smaller forecourts that provide a vital service in areas where the supermarkets don't have a foothold.

"It would be bad news all round if these forecourts shut up shop for good."

Mr Madderson said one thing the government could do to help would be to extend the Rural Fuel Duty Relief scheme.

It hands 5p per litre to petrol retailers in specified rural areas to support hard-pressed businesses.

"If that was extended to more independent community garages, then that would help them to keep open and keep supplying key workers," he added.

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