Fuel Retailers Face Diesel Losses Amid Price Spike from Middle East Conflict
The Petrol Retailers' Association (PRA) has revealed that many fuel retailers are currently losing money on diesel sales following a sharp spike in wholesale prices triggered by the ongoing conflict in the Middle East. This disclosure comes as Chancellor Rachel Reeves plans talks with retailers and the Competition and Markets Authority (CMA) to address concerns over potential price gouging.
Industry Denies Profiteering Claims
Gordon Balmer, executive director of the PRA, which represents a significant portion of the fuel sector, told Sky News that suggestions of pump profiteering are wide of the mark. He explained that some operators' buying contracts involve days-long lags on market costs, making it impossible to keep up with the dramatic increases seen last week as global oil prices soared.
Balmer criticized a warning issued by the chancellor on Tuesday that the fuel sector would not get away with price gouging, stating that the announcement of a looming meeting involving Reeves, retailers, and the CMA was news to him. He has consistently denied that the UK fuel market is beset with profiteering, despite the CMA's ongoing accusations since 2021 that the industry gives motorists a poor deal at the pumps.
Wholesale Price Surge and Supply Disruptions
The wholesale price of diesel rose by up to 25p per litre at one stage last week, according to Balmer. He attributed this to supply disruptions, noting that 20% of Europe's diesel now comes through the Strait of Hormuz shipping lane, which is currently closed to most tanker traffic due to the conflict.
UK diesel is particularly exposed to international market shifts because, unlike petrol, the vast majority of supply is imported. Balmer expressed hope that a release of reserves under the direction of the International Energy Agency, expected to be announced later on Wednesday, would help fill some of the void left by the Strait's closure.
Market Impact and Consumer Advice
Commenting on the current state of the market, Balmer said, "It's very busy out there... supply of fuel is tight and forecourts remain busy." Sales have been elevated since last week when drivers rushed to avoid the worst of the price hikes.
The latest data from the RAC shows the average cost of unleaded petrol increased by a further 1p on Tuesday to 139p per litre, while diesel rose by 2p to 155.1p per litre. Balmer noted that wholesale costs for diesel—the workhorse of the UK's haulage industry—have come down from earlier peaks but remain 18% higher since the conflict began. He warned it would take time for all forecourts to reflect such changes.
Drivers are being advised to use online fuel finder services to shop around for the best prices in their area. Chancellor Reeves hailed this scheme as a way to drive competition while giving evidence to the Treasury select committee of MPs on Wednesday.
Government Response and Economic Concerns
Reeves emphasized the broader economic impact, stating, "It's certainly not good for the British economy to have trade disrupted, and especially when so much oil and gas comes from that part of the world. But the best thing that we can do as a government is to seek to de-escalate this conflict."
The CMA has stated it is keeping a close eye on the fuel market and will call out any operators suspected of price gouging. However, Sky News has so far been unable to confirm with the regulator whether any such action has been taken.
Balmer admitted that a return to normal price levels could take weeks due to complicated production restarts and long delivery times from the Middle East, underscoring the prolonged challenges facing the fuel industry and consumers alike.
