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It’s easier to refine than petrol and it’s the preferred fuel of the working bloke, so why does diesel cost so much?The escalating price of diesel fuel has been cause for panic over the past several months. We’re paying more to transport goods to supermarkets, forcing the price of the goods to go up as well. Public transport (buses, country trains) can cost more for the same reason. Everything (goods and services) reliant on diesel-engined transport of one kind or another rises in price with diesel fuel. Higher diesel pricing has an impact on the household budget too, if the family gets around in a one-tonne ute, an SUV or a passenger car powered by a diesel engine. That extra outlay eats into discretionary spending – think Tim Tams, Netflix or pokies – and sometimes essential spending also. A new crisis for 2022According to the New South Wales state government’s 'Fuel Check' app, in the first week of November the price of diesel averaged $2.36.8 in Sydney. In contrast, 91 RON unleaded petrol averaged $1.99.4 per litre. Not only is that quite a gulf between diesel and petrol pricing, it’s a major leap from diesel pricing at the end of last year as well. Auto Fleet News has compiled national average pricing for diesel and ULP – unleaded petrol – from figures supplied by the Australian Institute of Petroleum (AIP) over several years.  With one notable exception, petrol and diesel prices to 2021 were always within 10 cents a litre of each other – with the price of diesel ($1.43 a litre) actually lower than ULP ($1.48 a litre) in 2021. That’s nearly a dollar per litre less than the current pricing for diesel, as per the Fuel Check app. Diesel fuel pricing has never jumped so high, so quickly, and so much further apart from petrol. Shooting war provokes a trade warWhat happened in 2022 to send the price of diesel skyrocketing? Russia invading Ukraine, that’s what. Russia is the largest exporter of crude oil in the world, after Saudi Arabia. Who knew? When many nations around the world slapped trade sanctions on Russia for its invasion of Ukraine in February of this year, that halted Russian exports, including crude oil – from which diesel fuel is refined. Australia doesn’t receive its oil from Russia, but the sudden chokehold on Russian oil reduced supply right across the world. And as we all know from Economics 101, reduce supply and you increase demand (often disproportionately). After the sanctions were imposed, crude oil suppliers to Australia found other markets that were willing to pay more. Australia was compelled to pay more as a consequence. Once the price of fuel was hitting $2.00 a litre, the Morrison government halved the 44 cents/litre fuel excise and the price briefly returned to bearable levels. Adding to our woes, the Aussie dollar is currently worth around 65 US cents. That’s a precipitous slide since April, when the Aussie dollar was buying 75 US cents. Guess which currency we use to buy fuel? What has caused the spike in diesel fuel pricing this year?
No love from retailersFrom late September, local prices for both petrol and diesel peaked when the full excise was reimposed by the Albanese government and the Aussie dollar fell to just 62 US cents. While petrol pricing levelled out, the diesel price kept climbing. One reason for that appears to be the lack of a retail discount cycle for diesel. As the AIP explains it: “There is no retail discounting cycle (ie: sawtooth pattern) for diesel, as only 25 per cent of diesel is sold through retail outlets and most of this goes to contract or fuel card customers rather than private motorists; most diesel is sold in bulk to commercial/industrial customers (eg: mining, transport and farming) on long term contract; such contracts are subject to rigorous competition under regular market tenders.” There’s a school of thought that retailers keep diesel pricing high to offset discounted petrol pricing, because it’s ULP that gets all the press. You may have noticed that Channel Nine’s news each night tells viewers what the lowest and highest prices are across the city. It’s always the prices of ULP being quoted, not diesel. That could be the explanation for retailers being too slow to reduce their margin on diesel fuel during this difficult period, which is what the state motoring associations argue. The AIP argues on the other hand that retailers make very little profit from petrol and diesel sales, citing just 16 cents per litre between average wholesale and retail diesel prices during November. That amount is not profit alone, it’s also paying the overheads for the retailer. Who’s right and who’s wrong then? The motoring associations or the AIP and its retailers? It’s hard to know. Taken in isolation, 16cpl is not a lot, but when the average service station is typically selling thousands of litres a day, that does multiply into a respectable amount of money. Furthermore, service stations are often convenience stores also, selling chocolate bars, milk and newspapers to subsidise reduced profit from fuel and to even out the revenue peaks and troughs of fuel revenue. What’s the solution for the consumer?If you can’t afford to run your one-tonne dual-cab 4x4 ute or large SUV, should you sell it? If you do, you’re left with this conundrum: What sort of car will you choose to replace the dual-cab or SUV, and will you be able to secure delivery of that new vehicle in a reasonable timeframe? As long as the price of diesel remains within the family budget, it’s probably better to keep your vehicle. At this point in time there are very few practical alternatives to the diesel-engined dual-cab ute, especially the 4x4 variants. If, however, your dual-cab never goes anywhere near a gravel track and never tows a caravan, maybe it’s time to sell it. Whether you should keep your diesel ute or SUV will depend on how you use it. Take for example the LDV D90, an SUV available in four-wheel drive configuration with either a diesel or petrol engine. Both powerplants displace 2.0 litres and both are turbocharged. The diesel D90 has an eight-speed automatic transmission and the petrol D90 has a six-speeder, but otherwise these two variants are mechanically close. At the prices from Fuel Check listed at the start of this article, the diesel D90 remains markedly more cost-effective to run in the city and suburbs, based on the ADR 81/02 urban-cycle figures for each vehicle. It’s lineball with the petrol D90 in a mix of driving conditions, and the petrol D90 is cheaper to run when most of the driving is on the open road. Here’s how the theoretical costs work out across the two vehicles and the three fuel economy modes over a 100km distance. Urban cycle (built-up areas) Extra-urban cycle (highways and freeways) Combined cycle (mix of urban and open-road driving) Ways to reduce spendingWhy is diesel so expensive right now in Australia?Global diesel prices have been steadily increasing throughout the year due in part toRussia's invasion of Ukraine and the subsequent increased competition for fuel. In the past week, the average price of diesel was $2.24 a litre compared with $1.74 a litre of petrol.
Why is diesel suddenly so expensive?Over the last year, the cost of diesel has ballooned by over 40 percent, compared with 11 percent for gasoline. Diesel prices are high because the fuel is scarce worldwide, including in the United States, which in recent years became a net exporter of oil and petroleum products.
Why are diesel prices higher than petrol in Australia?Most of the fuel in Australia comes through Singapore. The price that it is sold for there is the wholesale price, or the terminal gate price. At the moment, the wholesale price is higher for diesel, about 30 cents a litre more than petrol.
Why is diesel now more expensive than petrol?It is thought that a surplus in petrol production and a deficit in diesel production is accounting for the differences in prices.
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Why is diesel so expensive in Australia
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