Diesel prices have hit a record high, with the average cost in Britain now at almost £2 a litre. The RAC has warned that the commodity may soon reach £3 per litre, causing financial strain for motorists attempting to fill their tanks.
Diesel remains vital for countless small enterprises that depend on commercial vans, haulage, and heavy equipment. The price disparity between diesel and petrol exists prior to taxation, influenced by refinery costs, trade prices, and supply trends.
The manufacturing expense is a primary driver, as the process to refine diesel is costlier than refining petrol. Diesel possesses a heavier density and a longer chain of hydrocarbons, making its refining process more complex. Environmental regulations require the removal of contaminants like sulfur and metals, which adds to the expense.
There is significant demand for diesel, stemming not only from private cars but also public transit, delivery trucks, agricultural machinery, boats, generators, and various other equipment. As the seasons cool, demand increases because the oil used for home heating shares the same base ingredients as diesel fuel.
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Iran Conflict Raises Prices
The Iran conflict has significantly raised pump prices, with diesel recorded at 191.5p per litre on April 15, compared to 158.3p for petrol. While prices retreated after the US and Iran agreed to a framework deal in June, they have since climbed again as tensions resurfaced.
Simon Williams, head of policy at RAC, stated: ‘The average price of a litre of diesel has now reached the highest level in UK history at 199.53p, in what will be a financial blow to households and businesses that use their vehicles regularly.’
Fueling an average family car now costs nearly £110, which is £31 more than at the onset of the US-Iran conflict. Unleaded petrol is also rising, averaging 174.13p per litre, which is 41p higher than the price at the start of the war.
The UK only generates about half the diesel it consumes, making it heavily dependent on imports. Consequently, British diesel costs far exceed petrol prices, as the nation competes for limited supplies at high rates due to global demand outstripping availability.
Global Supply Chain Disruptions
Because of this, diesel costs are highly susceptible to international supply chain disruptions and geopolitical clashes. The RAC has warned that these prices have entered ‘new uncharted territory’, with experts fearing drivers might face £3 per litre.
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Over the weekend, President Trump hinted that he may ban US exports of diesel which sent Brent Crude soaring to $108 a barrel. It has fallen back slightly this morning to $105. In response, diesel has surged to the highest price in British history at 199.53p a litre as of 29 September.
The RAC estimates that petrol and diesel vehicles have collectively incurred approximately £1.7 billion in additional running costs over the 100-day period since the conflict began. With worries persisting over the global supply of wholesale diesel, drivers are facing increased expenses.
Refining Capacity Struggles
Demand for diesel is robust globally, yet limited refining capacity cannot be quickly expanded to fill the void previously covered by Saudi Arabia and Kuwait.
Now, with the US potentially impacting diesel exports, markets have wobbled and pumps have reacted.
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