Dry October: UK Government temporarily suspends competition law to combat fuel shortages
October 4, 2021
3 min read
What's going on here?
The UK Government has suspended competition law for the oil industry to help them work together to target petrol stations most in need of fuel.
What does this mean?
Labelled the “Downstream Oil Protocol”, the Government’s decision to temporarily suspend the Competition Act 1998 for the oil industry is the latest move to combat the unfolding fuel crisis in the UK. This comes after the Petrol Retailers Association reported that as many as 5,500 of the UK’s 8,000 filling stations may be out of fuel. This level of outage is largely being attributed by the government and oil companies to consumer panic buying, not the shortage of HGV lorry drivers to drive the fuel around the country.
The suspension of competition law allows oil suppliers to share information on which locations need to be prioritised and potentially fuel their competitor stations. In normal circumstances, these are behaviours which competition law prohibits in order to protect consumer prices and ensure fair competition in industries. However, since the government’s announcement on Monday 27 September 2021, the shortage is reported to have improved due to a dissipation of panic buying, although the problem has by no means disappeared
What's the big picture effect?
The Government’s decision to suspend competition law is not the first one of its kind in recent times. In March of 2020, competition laws were relaxed for supermarkets to maintain food supplies and combat panic buying as an early response to the pandemic. However, while government response may be the same, the current fuel crisis points to wider issues beyond short-term panic buying and pandemic-related transport delays. Specifically, it is indicative of the scale of labour shortages brought on by Brexit and the extent of its impact.
Even before the Covid-19 pandemic, there was an estimated shortage of about 60,000 lorry drivers in the UK, after a loss of 72,000 over the last few years. This has then been exacerbated by a backlog of 54,000 HGV licenses which are waiting to be processed by the DVLA to certify new or existing drivers. Clearly, this is not a new problem, but the fuel shortage has acted as a stark wake up call as to the scale of potential issues caused by Brexit.
Ultimately, the suspension of competition law is emphasised as being a temporary measure only. This begs the question: what further action will the government take to deal with the HGV driver shortage? Business Secretary Kwasi Kwarteng has assured consumers that the government has “long-standing” contingency plans to combat the problem, including offering temporary visas to 5,000 foreign lorry drivers and training an additional 4,000 UK drivers. However, Rod McKenie, director of policy for the Road Haulage Association, said these measures would “barely scratch the surface of the problem”.
Even if the government enacts these contingency plans and resolves bottlenecks surrounding the issue of HGV licence backlog, it seems unlikely this will be enough to tackle the wider issues at play. New rules on value-added tax and low wages comparable to European countries are making the UK an increasingly less attractive place to work. Elizabeth de Jong, director of policy for Logistics UK, states that long-term solutions will need to tackle these issues by offering more attractive employment terms and higher wages in order to be effective. This may have a knock on effect for supply chains and business costs across many sectors.
The suspension of competition law offers a temporary solution to shortages. However, there is clearly an urgent need for a substantive long-term plan by the government. While panic buying of fuel may be easing up, the full effect of Brexit is still emerging and it seems unlikely that this is the last we will see of shortages.
Report written by Iris Best
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