Motorists across the UK are facing a bewildering 'postcode lottery' when filling up their cars, with petrol prices varying dramatically from one forecourt to the next, even on the same street. While the price per litre is displayed prominently, the reasons behind the stark differences are far less transparent, leaving drivers questioning why their location can significantly impact their fuel bill.
The Postcode Pricing Puzzle
Recent figures from the AA highlight the scale of the disparity. In Horsham, Sussex, prices recently ranged from 136.9p to 140.9p per litre. Just ten miles away in Crawley, drivers could find fuel for between 128.9p and 131.9p. This means a driver filling a typical 55-litre tank at a Sainsbury's in Crawley could save £4.40 compared to the same supermarket's forecourt in Horsham.
Luke Bosdet, the AA's fuel price spokesperson, identifies two key complaints from members: "The pump-price postcode lottery between neighbouring towns and communities, and the difficulty in locating bargain-priced fuel." This variation persists despite retailers selling an identical product, purchased from the same wholesale markets.
What Determines the Price at the Pump?
According to the RAC, the wholesale cost of petrol itself currently constitutes only about 23% of the price consumers pay. Simon Williams, RAC head of policy, explains this cost is influenced by the global oil price and the pound-to-dollar exchange rate, as fuel is traded in US dollars.
On top of this, the UK government takes a significant slice through VAT and fuel duty, which together account for a substantial 56% of the pump price. The remaining portion covers delivery, the retailer's operational costs, and their profit margin.
Interestingly, smaller, independent retailers can sometimes undercut larger chains. Their nimble size allows them to buy fuel when wholesale prices dip temporarily, whereas bigger buyers are locked into longer-term supply contracts.
Supermarkets, Competition, and the 'Rocket and Feather'
Supermarkets play a dominant role, owning around 20% of UK forecourts but selling roughly 40% of all fuel. They often use petrol as a 'loss leader' to attract shoppers into their stores. In contrast, dedicated fuel companies lack this secondary revenue stream.
A major issue for consumers is the alleged 'rocket and feather' pricing tactic. Motorists frequently complain that pump prices shoot up rapidly when wholesale costs rise but fall much more slowly when those costs drop. This has been evident recently, with wholesale prices falling since late November without a corresponding swift decrease on forecourts.
The Competition and Markets Authority (CMA), which now monitors the sector annually, found supermarket fuel margins averaged 8.4% in the first half of 2025, while other retailers averaged 9.8%. This represents a significant increase from 2017, when supermarket margins were just 4%.
Dan Turnbull, CMA Senior Director for Markets, stated: "Drivers could see lower prices if competition between businesses was stronger. The main issue is that motorists can’t easily compare a wide range of prices in real time."
The Future: Transparency and Tools for Drivers
To address this, the CMA has pushed for a government-run price comparison tool, set to go live this year. This 'fuel-finder' scheme aims to empower drivers with real-time local price data, encouraging forecourts to compete more aggressively and potentially reducing the stark disparities between neighbouring areas.
Until then, motoring groups advise drivers to shop around using existing apps like PetrolPrices.com. As Simon Williams of the RAC puts it, if the price is too high, "People should be voting with their right foot and driving on." The Petrol Retailers Association maintains its members price fuel "competitively and fairly," arguing that the range of prices itself is evidence that competition is functioning in the market.
