Why Diesel Prices Are Higher Than Petrol – Will It Ever Be Lower Again?

Why Diesel Prices Are Higher Than Petrol – Will It Ever Be Lower Again?

Anyone who drives a diesel vehicle knows the pain of filling up these days, with diesel prices averaging $2.22 per litre across most of Australia’s major capital cities.

Diesel prices started 2022 at about $1.61 per litre and have risen exponentially throughout the year.

While diesel has always been roughly higher than petrol – averaging 5c/l over the past 15 years – it’s only this year that the price difference has been amplified to a very painful point for diesel motorists.

The bad news for diesel drivers is it doesn’t look like prices will be falling drastically anytime soon. The good news is there are ways to save on diesel, if you know how. Keep reading to find out how you can save money on diesel (and all fuel) today.

Should Diesel Be Lower Than Petrol?

In theory, diesel prices should be cheaper than petrol – on paper at least. Diesel fuel is a less refined petroleum distillate than petrol, so it should always be cheaper to produce. The problem with diesel prices has more to do with the laws of supply and demand for various petroleum products, not the actual cost of production.

Whether diesel should be lower or not, under normal circumstances, the wholesale price of diesel and petrol are very similar in Australia. But over the past six months, the price disparity has grown to roughly 0.50c.

In recent times, however, diesel prices have soared well above petrol prices, and it mostly comes down to the competition for the finished product.

Australasian Convenience and Petroleum Marketers Association (ACAPMA) CEO Mark McKenzie blames the ongoing issues in Europe.

He told the ABC: “The massive impost on the cost of diesel at the moment is because of the renewable energy crisis in Europe, and the fact so much diesel is being snatched up for use in power generation”.

Russia was one of the world’s largest producers of diesel, supplying diesel mainly to the European market. Yet with many countries imposing sanctions against Russia, it’s caused a domino effect through markets throughout the world and led to rocketing diesel prices.

The highest real prices of fuel (petrol) were in the pre-1960s, when the costs of shipping oil to Australia were much higher (i.e. prior to the introduction of large bulk carriers).

Average ULP Pump Prices 2007-2021

NSW VIC QLD SA WA NT TAS National
2007 126.8 126.0 120.3 126.1 127.0 136.8 129.5 125.4
2008 143.8 143.4 136.7 143.1 143.3 154.8 149.3 142.4
2009 120.7 121.3 117.6 120.2 119.2 128.9 124.2 120.3
2010 125.7 125.8 127.2 125.1 127.0 134.9 132.1 126.3
2011 140.9 139.8 142.2 140.3 142.0 151.3 147.0 141.2
2012 141.4 140.7 145.6 141.8 143.0 157.6 150.8 144.3
2013 148.0 145.4 149.6 146.0 148.1 166.3 158.2 147.9
2014 149.0 145.7 151.0 146.4 149.6 170.4 158.9 148.8
2015 130.4 126.3 131.8 127.6 130.2 134.3 137 129.6
2016 117.6 116.4 119.8 114.6 118.3 121.3 123.2 117.8
2017 128.3 128.7 131.1 126.9 129.6 137.8 139.5 129.3
2018 143.6 143.4 145.3 141.6 144.9 160.4 154.7 144.3
2019 141.1 141.1 142.8 142.7 141.8 151.4 150.7 142
2020 123.2 123.9 124.5 120.7 120.8 134.7 131.0 123.4
2021 148.7 147.6 148.9 142.8 146 155.2 150.7 147.8

Average Diesel Pump Prices 2007-2021

NSW VIC QLD SA WA NT TAS National
2007 134.7 129.8 124.7 133.1 135.9 139.1 135.4 131.3
2008 164.3 160.3 154.9 163.1 166.7 171.1 168.1 161.6
2009 123.3 119.8 119.4 122.1 127.3 132.2 128.4 122.5
2010 130.3 126.5 129.6 129.1 133.3 139.3 134.1 130.1
2011 148.9 145.1 148.3 148.2 150.8 159.0 152.6 148.5
2012 147.9 146.2 149.3 149.5 150.5 158.6 155.1 150.6
2013 154.1 151.2 154.4 154.4 156.3 168.4 159.6 154.3
2014 156.8 153.1 156.6 155.9 159.7 172.6 164.2 156.8
2015 130.1 125.9 131.1 128.2 134.9 138.2 137.8 130.4
2016 117.8 116.2 118.9 116.4 121.6 123.3 122.8 118.5
2017 128.5 128.3 129.5 127.1 132.3 135.1 136.4 129.6
2018 148.9 148.8 148.7 147.6 152.8 164.8 156.9 149.8
2019 147.9 146 147.1 147.9 148.9 161.4 158.8 148
2020 126.3 126.2 125.7 125.7 127.3 142.1 139.0 126.9
2021 142.9 142.6 142.5 142.2 142.1 157.2 149.2 143

Source: https://fleetautonews.com.au/historical-pump-prices-in-australia/

Why Are Australian Diesel Prices Higher Than Petrol Now? Is it Higher Globally?

The global price of diesel is at a near record high not just in Australia but much of the world, from the UK to the US and beyond.

The reason diesel prices are higher than petrol can mostly be traced back to the demand for refined products. Machines use diesel — from Russian tanks to electric generators and bobcats excavating on your local street. And, with the sanctions in place against Russia, this is bottle-necking the diesel supply and causing prices to skyrocket.

Australia is in a unique position, and we use quite a lot of diesel for mining. In fact, only around 33% of diesel demand is retail, with the rest being bought wholesale and poured into diggers, tractors and mining equipment, especially in Western Australia. Today, Australia sells twice as much diesel as petrol. This is a pretty big increase from 2010 when the two products were sold roughly at equal volume.

Why Diesel is Popular in the Transportation Industry

In Australia, only about 30% of diesel is used in utes and SUVs. The rest is used in diggers, tractors and mining equipment. There are many reasons the transportation industry uses diesel to fuel their rigs, including:

  • It’s more fuel-efficient, roughly a third more than petrol
  • Makes it possible to deliver goods more quickly and efficiently.
  • It’s possible to blend additives that protect against cold weather
  • It’s readily available for use by large or small customers

When Experts Say Diesel Prices Will Come Down

When do the experts expect diesel prices to come down? Will they come down? It depends on who you ask. While anecdotally diesel prices across the globe are dropping slightly, the experts say they haven’t fallen enough.

Diesel prices have been at record highs for months now, despite the rise and fall of petrol prices. The price of petrol fluctuates in Australia in part because of price cycles, but that is not the case for diesel.

Diesel doesn’t fluctuate like petrol does in Australia but rather tends to be more reflective of movements of oil price.

How Can You Save Money on Diesel & Fuel?

With the uncertainty of diesel prices and “will they/won’t they” drop, what can diesel drivers do to combat the high prices?

You can of course use fuel checker apps to find the cheapest prices near you, like:

However, whether you’re a business or non-business, one of the best methods for cutting costs on diesel – and petrol too – is to invest in a fuel card.

One of the biggest benefits and drawing cards (mind the pun) of a personal or company fuel card is the great fuel savings. Most fuel card providers have excellent promo offers – where you can save significant amounts on the pump price (for example Shell offers 6c/l off for the first 6 months). But a fuel card doesn’t just save you money at the pump with great discounts, it also streamlines your business fuel administration, protecting against overspending and fraud.

KEEN TO START SAVING TODAY?

See how much you can save with our card explorer

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