Page last updated at 13:41 GMT, Tuesday, 21 October 2008 14:41 UK

Isles fuel prices probe ruled out

Petrol pump
Fuel prices on the mainland have dropped below 1

The Office of Fair Trading (OFT) will not investigate fuel prices on the Western Isles, according to the local MP who requested the probe.

Nationalist Angus MacNeil accused the OFT of not understanding the "nuts and bolts" of costs in rural Scotland.

The MP made a complaint of anti-competitive pricing and distribution practices.

According to website, unleaded petrol costs 121.9p-a-litre and diesel 130p in the isles.

On the mainland, a price war between supermarkets and fuel retailers has seen the price of unleaded petrol drop below 1.

From the answers they have given me, they clearly don't understand the difference between the islands contract and what the average monthly price means
Angus MacNeil
Western Isles MP
Earlier this year, Mr MacNeil urged the OFT to investigate the fuel supply arrangements between BP and Scottish Fuels.

He claimed that BP bases its wholesale prices for the UK mainland on a two day period on the oil market in Rotterdam, but bases its prices for the Western Isles on an full monthly average.

In a letter to the MP, the OFT said that it "finds it hard to see how using a longer period over which to base prices could amount to being anti-competitive or necessarily act to the detriment of consumers".

The OFT's chief executive John Fingleton adds: "As we understand it, such averaging of market prices over a period of a month, rather than using a single day's spot price will tend to reduce fluctuations in wholesale prices - since a sudden increase (or decrease) in spot prices will only be reflected in wholesale prices gradually over the course of a month, rather than at two days' lag and in full."

The OFT concludes that "as such behaviour is unlikely to amount to an abuse, even if BP were found to be dominant in a relevant market, we are unable to investigate further under the Competition Act".

'Sometimes worry'

Seven years ago the OFT carried out an investigation into the price of petrol and diesel in the Western Isles and found "no reasonable grounds for suspecting an infringement of the Competition Act".

Mr MacNeil said he was "disappointed" by the OFT's latest decision and suggested that it might be due to a lack of resources for the watchdog.

He said: "I believe these contracts are contributing to the lag or the delay in the fuel prices dropping particularly in the islands.

"We are now seeing a 22p-a-litre difference between Stornoway and Inverness. I don't think the OFT fully understand the issue and sometimes worry that the OFT might not be properly funded.

"From the answers they have given me, they clearly don't understand the difference between the islands contract and what the average monthly price means."

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