UK Watchdog Launches In-Depth Probe Into Soaring Refining Margins

By Jaime Llinares Taboada

The U.K competition regulator said Thursday that it is concerned about increasing refining margins driving up fuel prices and will launch an in-depth market study into the issue, while adding that the fuel retail market seems to be competitive.

The Competition and Markets Authority has published the results of an urgent review requested by the U.K. government in light of the increase in gasoline and diesel prices at gas stations. The CMA found that the increase in global crude oil prices accounts for a third of the year-on-year rise in road fuel prices, or 20 pence per liter. The growing gap between the price of crude entering refineries and the wholesale price of petrol and diesel leaving them accounts for just over 40%, or 24 pence. The depreciation of the sterling adds a further 12%, or 7 pence.

In addition, the CMA said the fuel retail market seems competitive and retailer margins, or the gap between wholesale and retail prices, haven't been a significant contributor to the overall rise in pump prices.

As a result, the watchdog has launched a market study to examine the road fuel market in more depth, with an update expected to be published in the autumn. The regulator's General Counsel Sarah Cardell said that the CMA needs to get to the bottom of whether there are legitimate reasons for the increase in refining margins, and also find out whether the disparities in retail prices between urban and rural areas are justified.

Oil giant Shell PLC said Thursday in an update that refining margins increased to $28 per barrel in the second quarter from $10 in the first quarter, which boosted the company's refining profits by up to $1.2 billion in the period.

Write to Jaime Llinares Taboada at [e-mail]; @JaimeLlinaresT

(END) Dow Jones Newswires

July 08, 2022 06:37 ET (10:37 GMT)

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