A five-month long investigation by the Office of Fair Trading has ruled that the high level of fuel tax and increasing costs of crude oil causes higher fuel prices, not because fuel companies are manipulating the price of petrol and diesel as some have suggested.
It found "very limited evidence" that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops so it has scrapped plans to hold a full inquiry.
The OFT said its investigation into the market did identify a lack of pricing information on motorways as a concern and it will not rule out taking action in some local markets if there was "persuasive evidence of anti-competitive behaviour".
The investigation came about after campaigners called a full inquiry into the sector, saying there needs to be greater scrutiny.
But the OFT said that the UK had some of the cheapest pre-tax road fuel prices in Europe, noting that in the 10 years to 2012 pump prices increased from 76 pence per litre (ppl) to 136ppl for petrol, and from 78ppl to 142ppl for diesel, caused largely by an increase of nearly 24ppl in tax and duty and 33ppl in the cost of crude oil.
"The OFT appears to have failed to address the key issues of why diesel is more expensive than unleaded in the UK when this is not the case in Europe, why falls in the oil price take so long to be reflected at the pump and why there are such variations in price, often from the same branded forecourts, within the same area.
"They did not address the whistleblower evidence of potential rigging of the oil commodity market. Where is the fairness in all of this?"
OFT chief executive Clive Maxwell responded by saying: "We recognise that there has been widespread mistrust in how this market is operating. However, our analysis suggests that competition is working well, and rises in pump prices over the past decade or so have largely been down to increases in tax and the cost of crude oil.
"Our call for information has not identified any evidence of anti-competitive behaviour in the fuel market at a national level, where competition appears to be strong. There may be some issues at a local level. Where we receive evidence of potential anti-competitive behaviour we will consider taking action."
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