Oil giants bark at watchdog plans

A major row is brewing over the Government's proposals to create an ombudsman to watch over the UK oil and fuel industry. Leading objections to the scheme, which has reportedly been delayed by more than a month, are some of the world's major oil companies, which believe the plans have not been properly thought out and that such a body is unnecessary.

The argument centres on the Office of Fair Trading (OFT) report on the British fuel industry, published every two years. The principal aim of the survey is to establish whether competition, at the petrol pumps and through the fuel retail chain, is alive and well.

UK motorists pay the highest pump prices in Europe, but once tax is taken out of the equation, raw fuel prices are among the lowest. The intensity of competition between oil majors such as Shell, Esso and BP and supermarket chains such as Tesco has historically been strong enough for the OFT to conclude that the industry is competitive.

The oil majors say that unless the Government is trying to undermine the OFT's authority, it should accept its findings and allow the fuel industry to continue without a special watchdog. But the energy minister, Brian Wilson, is extremely keen to back a fuel ombudsman.

In recent years, the fuel industry has produced a series of bitterly contested internal issues, none of which are addressed by the OFT's report. Many of these, including battles over franchise contracts, promotion schemes and fuel temperatures, have ended in drawn-out legal cases involving Shell, Esso and others.

These are precisely what Mr Wilson wants to avoid by establishing a more nimble body than the OFT.

"I want to see an independent mechanism that allows the many issues facing the industry to be addressed," he said. "The industry needs a body that increases transparency, and a lot of it is opaque at present."

Part of Mr Wilson's vision for the ombudsman, which was scheduled to be announced last week, is voluntary involvement by the interest groups in the industry. That, say spokespeople for the oil majors, is another of the idea's failings, since the regulator would never be properly independent.

Sources at the Department of Trade and Industry say that Mr Wilson's plans have suffered delays as a direct result of the oil majors' stance, and their support of the proposal is seen as crucial.