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Energy: Oil Prices

Volume 705: debated on Wednesday 12 November 2008

asked Her Majesty's Government:

What proposals they have to ensure that fuel companies pass to their customers as quickly as possible any drop in oil and related prices. [HL5791]

The Government believe that efficient and competitive markets for wholesale and retail fuel are the most effective means to pass through falls in global fuel prices.

Ofgem is the independent regulator of the gas and electricity supply markets, and is responsible for ensuring that those markets are competitive. Ofgem has stated that there is clear evidence of a time lag between wholesale and retail prices as energy suppliers tend to buy most of their gas in advance on the forward market. It has found no evidence that prices are passed through to a greater extent when wholesale prices rise than when they fall. Following its energy supply markets probe, Ofgem is proposing that companies produce separate regulatory accounts for their retail and generation businesses which will aid transparency on this issue.

Competition in the UK's energy supply markets has previously driven down retail prices, following wholesale price falls, more quickly than in less competitive markets in other EU states.

The Office of Fair Trading monitors the UK petrol and diesel market. It is empowered to act if the price level appears to be the result of anti-competitive behaviour.