Road Fuel Market

Graeme Downie Excerpts

Wednesday 6th November 2024 Commons Chamber

[Graeme Downie (Dunfermline and Dollar) (Lab)]

The topic for this, my first Adjournment debate, is fair fuel pricing, an issue that has been raised repeatedly with me by residents of Dunfermline and Dollar since I was elected in July, and that has been examined by previous Governments of all colours and by the Competition and Markets Authority.

In July this year, the CMA said that weakened competition in the fuel sector is negatively impacting drivers’ wallets. Its examination found that, in 2023 alone, high prices cost motorists a staggering amount of money. In the midst of a cost of living crisis, that seems especially egregious. The CMA’s warning was not, however, the first or even the second significant warning on fuel pricing. After launching a market study in July 2022, which reported a year later and made a series of recommendations to protect consumers, the CMA has issued three interim reports. In those reports, the CMA found that drivers were overcharged at the petrol pump by £900 million in 2022 and a further £1.6 billion in 2023. That means that, in just two years, drivers were overcharged by some £2.5 billion on their fuel in the midst of a cost of living crisis. That is shameful profiteering, which we know hits lower-paid workers and families the hardest. The cost of living crisis has meant that changes in the prices of utilities and fuel have been sorely felt.

We have long understood the argument that rural drivers might pay more for fuel due to the increased logistical costs and additional staffing costs. I do not always find such arguments convincing, but they at least have a perceived logic to them. However, fuel is not a luxury; it is a lifeline. It enables people to commute to work, take their children to school, and provide care and support to loved ones.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on bringing the debate forward. I spoke to him beforehand; he and I share the same concerns in relation to fuel. Drivers in rural constituencies, such as ours of Strangford and Dunfermline and Dollar, are very much at the mercy of those who seek to charge more for fuel. Some have to travel far to get cheaper fuel, and it is debatable whether that is competitive or even logical. Does he agree that when it comes to competitiveness, we must have fairness and equality for every postcode, and recognise that prices in Kircubbin, the Ards peninsula and Dunfermline are similar, yet in Manchester fuel is almost 8p a litre cheaper?

[Graeme Downie]

I thank the hon. Member for his intervention; I believe that taking an intervention from him is a rite of passage in this House. I could not agree more, particularly in relation to constituencies such as my own, where there is a mix of urban and rural areas and the rural pricing hits particularly hard. Those are often areas that have poorer public transport as well, so the impact is felt even more.

Most small businesses rely on efficient and cost-effective transport for their deliveries, staff and customers, and that often means running and fuelling a car or van. High prices at the pumps have a direct impact on small businesses and squeeze already thin margins in the ongoing crisis in the cost of living and of doing business. Research by the Federation of Small Businesses shows that more than three quarters of small businesses saw their costs go up in the last quarter, and of those more than a quarter said that the increased price of fuel was one of the main reasons for that rise.

My constituency is just 20 miles from Scotland’s oil refinery in Grangemouth, yet residents in Dunfermline consistently pay a full 5p a litre more than those nearby in Glasgow, Stirling, Glenrothes or Kirkcaldy. That is despite the local supermarkets Tesco and Asda, as well as a host of other outlets in the city such as BP, all supposedly competing to be the driver’s choice. What we see in Dunfermline is a cluster of prices around the same level within the city, and price clustering around Dunfermline as well, with all supermarkets and suppliers at roughly the same price. That is not local competition; that is a local cartel. Even worse, my constituents are paying 134.7p per litre at Asda in Dunfermline, whereas in the Asda Bridge of Dee store in Aberdeen, 112 miles further north, they pay just 121.7p at the pump. Never mind 5p—that is a difference of 13p per litre.

In rural and semi-rural areas, as was said earlier, where public transport infrastructure is less entrenched—certainly in my constituency, where the train service is frequently short-formed, delayed or cancelled at short notice—fuel is not a choice; it is a necessity. My Dunfermline and Dollar constituents rely on their vehicles more heavily, yet often face the highest prices. That is an issue of basic fairness. I am all in favour of market forces being used to shape prices, but not where the market is demonstrably broken, and fuel pricing has all the signs of a broken market mechanism.

It is nothing short of outrageous that the most essential aspects of daily life are subject to broken competition, a non-functioning market and what appears to be price clustering by retailers. Across the constituency, small businesses and sole traders such as plumbers, builders, florists and taxi drivers, along with families, are paying the price. As we might say in Scotland, small businesses are being pumped at the pumps. Like many fellow Members of this House, I welcome the Chancellor’s announcement in the Budget, which we passed this evening, on freezing fuel duty, which will help people who are still feeling the impact of out-of-control inflation on their take-home pay. However, while this pricing behaviour by retailers continues, I am concerned that the full benefit of the Government’s efforts to keep down fuel costs will not be passed on to my constituents.

To help the House understand fully the consequences of this kind of price clustering and the effects of a broken market, I will share the experience of one of my constituents, Aimee, a 20-year-old apprentice who wrote to me last month. Aimee was proud to secure her apprenticeship, which she started this autumn, earning the apprentice minimum wage of £6.40 an hour. With just over £1,000 a month to live on, Aimee uses £200 a month of her hard-earned wages on fuel. She gets her petrol at Asda in Dunfermline where, as I mentioned, unleaded was 134.7p per litre yesterday. Her £200 is buying her 148.48 litres of fuel. However, if Aimee was buying her petrol at Asda Bridge of Dee in Aberdeen, where unleaded was 121.7p a litre yesterday, she would have paid just £180 for the same amount of fuel. That is a full £20 a month difference. Over the course of a year, Aimee would have to work an additional 36 hours just to pay for the difference in price of petrol for her to get to and from work. That is not justifiable. Aimee, who is learning while earning, is experiencing a real-terms pay cut differential due not to anything she has done, but to the effects of this broken market.

We encourage the use of greener transport, but we have seen the failures of the SNP Government and ScotRail to provide Fife with a reliable service, so that is not an option for people such as Aimee, with short trains and unreliable service, particularly in West Fife. One step that the SNP-Green coalition at Holyrood did take was to remove peak fares, which saw a 6.8% increase in train usage. However, that encouragement of behavioural change was swiftly removed—just like the Scottish Greens from the coalition—when the financial incentive of fairer train fares was also removed.

Behavioural change of a positive nature does not happen overnight, but the switch back to the car from the train does, and has. That short-sighted decision—like the short-formed trains that often serve the region—has put people off using green transport. Having been let down by the Scottish Government, commuters in Dunfermline are being taken advantage of by fuel retailers and market competition in my constituency.

[Alex Ballinger (Halesowen) (Lab)]

My hon. Friend is making an excellent speech. I have also noticed in my constituency that many fuel retailers are not passing on benefits to drivers and, as he recognises, the Competition and Markets Authority has said that those competition practices are unfair. I notice that the Government are taking forward a fuel finder app, which will allow customers and drivers to find out more information about different retailers and will drive competition. Does he agree that the Government should do that as soon as possible, so we can get that transparent and accurate information, and drivers in my constituency and others are able to get savings on fuel?

[Graeme Downie]

I thank my hon. Friend for that intervention. I will come on shortly to the action the Government are taking and where I think there is still more to be done.

The impact goes beyond personal strain; it creates an uneven playing field for businesses, hindering economic growth by harming small business owners in Dunfermline who rely on vehicles for operation. In this Budget the Government have taken a wide range of steps to help working people across the country, including in my constituency: a wage rise for 200,000 Scots, record funding to Scotland, fixing the mineworkers’ pension scheme, protecting the pensions triple lock and, as I have said, committing funds to maintain the freeze on fuel duty that the Conservatives failed to do and which would otherwise have seen people like my constituent Aimee paying even more for fuel.

I am also pleased that this new Government have confirmed that they will implement two of the CMA’s recommendations: an open data scheme called fuel finder that will require all fuel retailers to share their prices in real time, and a road fuels monitoring function that will report on the state of competition in the road fuel market. Scenario modelling by the CMA suggests that pump prices could reduce by between 1p and 6p a litre as a result of these measures, helping to ensure that drivers get a fair deal for fuel across the UK. I am keen to hear from the Minister what more she thinks the Government can do specifically around ensuring a fair and functional fuel market, so that pricing is fair and not allowed to cluster into local price-fixing, as seen in Dunfermline.

Fuel prices are undoubtedly subject to a range of external factors, as we have seen over the years, but by increasing transparency and ensuring real competition between forecourts, we can have a functioning market where competition helps drive down prices. However, nothing is preventing fuel retailers from choosing to do the right thing right now and to stabilise fuel prices, to remove price clusters like we see in Dunfermline and to ensure that people such as Aimee are not financially penalised for where they live. I hope this Government will build on the excellent start they have made to protect working people and small businesses, and I hope we will be able to do more to stop fuel retailers profiteering on the back of hard-working people up and down the country.