Safeway raises petrol prices

Unleaded petrol is going up 5p at Safeway

The UK supermarket chain Safeway on Thursday said it had raised its prices for unleaded petrol by 5 pence to 84.9p a litre, provoking anger among fuel price activists.

"The price before the petrol crisis last week was totally unsustainable," a Safeway spokeswoman said.

"At 79.9p we were losing money...our average cost of petrol has gone up to 82p a litre."

The retailer said its customers would still be able to buy "cheap" petrol as it would offer a 10p a litre discount to those spending £40 or more on groceries during a visit to one of its supermarkets.

The price of Safeway's four-star petrol is being increased by 4p to 88.9p a litre while diesel is rising by the same amount to 85.9p a litre.

Insensitive

The recently-formed People's Fuel Lobby said the Safeway move was insensitive.

"All it is going to do is provoke aggravation," spokesman David Handley said.

"It is very, very bad timing."

A spokesman for Farmers for Action said: "I cannot understand why Safeway has done this in the current climate and think people should simply refuse to buy petrol there.

"I think Safeway will soon understand what people power is."

Chorus of condemnation

A week ago, it emerged that three of the UK's leading petrol retailers, Esso, TotalFinaElf and Conoco - owner of the Jet network - had recently raised or were about to raise prices by about 2p a litre for unleaded petrol and 4p a litre for diesel.

All three firms were quickly forced to back down following a chorus of condemnation from the government and motorist groups.

But they maintained their argument that price rises were justified despite the high pump prices and the oil companies' huge overall profits.

According to Esso, a petrol retailer makes only about 5p on each litre of unleaded petrol sold for 84p, with the remainder accounted for by duty, VAT and the cost of production.

This 5p has to cover the cost of transportation from the refinery, storage, processing and credit card charges, which are alone more than 1p a litre, Esso says.

Anything left over is profit.

Intense competition

But with intense competition on UK forecourts, margins have been squeezed tightly.

On Thursday, BP Amoco, Shell, Texaco, Asda and Tesco all said they had no plans to lift prices.

Supermarket chain Sainsbury said it was reviewing the situation.

Esso said only that it was not increasing prices on Thursday and could not speculate on the future.

Many analysts say that, beyond the very short term, petrol retailers may be left with little choice.