Lack of competition resulting in drivers paying more than they need to when filling up at the supermarket.
Heading to the supermarket to fill up your vehicle is a convenient option for most of us ‒ you can pick up your petrol and diesel at the same time as your weekly shopping.
The trouble is that doing so means you are likely to overpay, and by a substantial amount too.
That’s the conclusion of a new report from the Competition and Markets Authority (CMA), which found that between 2019 and 2022 drivers overpaid when filling up at supermarkets by an average of six pence per litre.
So how have supermarkets gotten away with it up to now? And what can be done to deliver a fairer deal to drivers?
Following the herd
The CMA pointed out that supermarkets have traditionally been the cheapest place to buy fuel, with Asda generally recognised as the cheapest of all.
However, since 2022 Asda ‒ and rival Morrisons ‒ have both targeted higher margins from their fuel sales, and have therefore implemented higher prices.
You would think this would present an opportunity to other supermarkets, to undercut Asda and Morrisons and so secure the custom of more drivers.
Yet the opposite happened, with the likes of Tesco and Sainsbury’s instead raising their prices too.
While the CMA emphasised there was no ‘cartel’ behaviour here, it’s clear the competition is not working properly and drivers are paying the price.
This is particularly clear when it comes to diesel pricing.
The CMA noted that Asda had been slow to reduce its diesel prices in line with falling wholesale costs, while other supermarkets opted against becoming more competitive by cutting their prices further.
As a result, since January this year diesel drivers have been overpaying by around 13 pence per litre.
That sort of additional margin really adds up, particularly during a cost of living crisis when households are already finding their finances under pressure from other outgoings becoming ever more expensive.
Location, location, location
The CMA investigation also pinpointed how important location is when it comes to what you may have to pay in order to fill up your vehicle.
Usually, areas with a supermarket fuel retailer enjoy lower average prices, though there are significant differences between the highest and lowest amounts you might pay.
Those differences have grown as prices have gone up generally too.
So while supermarkets are overcharging us, at least if you have one nearby you will likely enjoy better prices than if you live in a rural area with no supermarket forecourt on offer.
The investigation noted the rip off that filling up at a motorway service station continues to be.
The ‘price premium’ that you’ll pay for doing so has grown in real terms over the last decade, with little price variation on motorways since there is limited competition between service stations.
If you’re looking for petrol then you’re liable to pay 20 pence per litre more with a motorway service station, or 15 pence per litre for diesel.
Making it easier to find a better deal
So what’s the answer? How can drivers get a better deal, rather than face being milked for higher margins by supermarkets?
The CMA reckons the solution is a ‘fuel finder scheme’.
Essentially drivers could see the prices on offer through apps, allowing them to make a more informed decision about where to fill up.
Crucially, such a fuel monitor would also mean that if retailers are clearly upping their margins unfairly then action could be taken. If there is more transparency, then ultimately it should mean drivers get a better deal.
Unfortunately, for any such monitor to get off the ground would require Government action, and I’m not so sure this is a fight the Government particularly wants to take on right now.
Put it like this ‒ I’m not holding my breath for this one getting off the ground.
This is one of the problems faced by the CMA, whenever it identifies areas that need action.
While it has some enforcement powers ‒ it fined Asda £60,000 for failing to provide relevant information in a timely manner during this investigation ‒ it is somewhat limited in forcing through lasting change.
In the end, it all comes down to how willing the authorities are to back the CMA, and as we have seen with travel, consumers can end up out of pocket when the CMA doesn’t have the support it needs.
That doesn’t mean that you simply have to accept unfairly high prices though. Check out our guide on how to cut the costs of filling up your car.