UK's temporary suspension of competition law in oil industry

By Alexander Lee

Woman putting up sign at petrol station during UK-wide shortage
https://bmmagazine.co.uk/news/uk-suspends-competition-law-to-get-petrol-to-forecourts/

A fuel shortage in the UK in October 2021 saw the Government temporarily suspending competition law regulations to combat the issue. Its plan is for the oil industry to collaborate in targeting petrol stations that are in the most need of fuel – dubbed the ‘Downstream Oil Protocol’. This is the result of recent reports suggesting that an approximation of 5,500 out of 8,000 gas stations are out of fuel – largely due to panic buying as a result of the pandemic, and not because of the shortage of fuel-carrying lorry-drivers.


Specifically, this temporary suspension of competition law means that oil suppliers can now exchange information regarding which stations to prioritise even if that means fuelling competitor stations. Competition law’s main aim is typically to prevent an imbalance in the market. Traditionally, consumers will have a weaker hand at the table because of their need for the product the seller provides. As such, competition law is imposed to prevent sellers from abusing their power to charge unreasonable prices, or to prevent multiple sellers from collaborating to form cartels and monopolies on a certain product. As of 27 October, this strategy seems to have improved the panic buying situation although it has not completely alleviated it.


There is some precedent for this – competition law was similarly relaxed for supermarkets in 2020 to maintain supply and tackle the issue of panic buying. However, the fuel shortage has longer term ramifications such as labour shortage implications that can be tied to Brexit. Whatever the case, it is clear that relaxing of competition law is only a temporary, not permanent stopgap measure.




References:

[1] Iris Best, ‘Dry October: UK Government temporarily suspends competition law to combat fuel shortages’, (Littlelaw, 4 Oct 2021) https://www.littlelaw.co.uk/2021/10/04/dry-october-uk-government-temporarily-suspends-competition-law-to-combat-fuel-shortages/ (accessed 12 Dec 2021)

[2] ‘Supermarkets to join forces to feed the nation’, (Gov.UK, 19 March 2020), https://www.gov.uk/government/news/supermarkets-to-join-forces-to-feed-the-nation, accessed 12 Dec 2021