The Competition and Markets Authority said on Friday that fuel retailers across the UK did not broadly increase their margins during the initial shock from the Iran war, but it warned that margins remain at historically high levels and that competition in the sector appears weak.
After intensifying its monitoring of fuel-sale profits in response to the Iran conflict, the CMA said it will launch inquiries into specific instances where individual retailer margins climbed between February and March. The regulators statement emphasised that, while the overall response by retailers did not show widespread margin expansion, outliers will be examined.
Fuel margins continue to sit at historically elevated positions, the CMA said, a pattern it links to limited competitive pressure in the fuel retail market. The watchdog highlighted that consumers face differing local prices and that those differences can be material: motorists who compare prices could reduce the cost of filling a tank by as much as 9.
The report noted the wider inflationary backdrop. The UKs consumer prices index increased by 3.3% in March, a rise the CMA said was supported by an 8.7% jump in motor fuel prices that month - the largest single-month increase since 2022 when Russia invaded Ukraine. The watchdog reiterated its earlier position that while some rise in fuel costs was unavoidable, it will take steps to ensure petrol stations do not unfairly exploit the situation.
Summary
The CMAs monitoring after the Iran conflict shows overall retailer margins were largely unchanged during the immediate market shock, but persistent high margins and local price variation point to weak competition. The regulator will investigate cases where margins rose between February and March. Rising motor fuel prices contributed significantly to a 3.3% increase in the consumer prices index in March, and drivers may save up to 9 by shopping around.
Key points
- Overall fuel retailer margins were largely steady during the initial market shock from the Iran war, according to the CMA.
- The CMA will investigate specific retailers whose margins rose between February and March.
- Local price variation means consumers could save up to 9 by comparing prices; rising motor fuel prices helped push UK CPI up 3.3% in March, led by an 8.7% monthly increase in motor fuel.
Risks and uncertainties
- Continued high fuel margins point to an ongoing lack of competitive pressure in the retail fuel sector - this could sustain higher consumer prices (impacts: consumer spending, transportation costs).
- The CMAs targeted investigations into margin increases between February and March introduce enforcement uncertainty for retailers identified as outliers (impacts: fuel retailers, regulatory compliance costs).
- Volatility in motor fuel prices, which contributed to a marked monthly CPI move in March, poses a risk to inflation measures and household budgets (impacts: general inflation, household consumption).
The CMAs heightened scrutiny aims to ensure that necessary increases in wholesale or commodity-driven costs are not used as cover for excessive retail margin expansion. The watchdogs review and any subsequent investigations will focus on individual instances where margins rose amid the period under review, rather than concluding that the sector as a whole raised margins in response to the Iran conflict.