Why is diesel more expensive than petrol?
- Why is diesel more expensive than petrol?
- How many diesel vehicles are there on Britain’s roads?
- Why do people choose diesel when it costs more at the pumps?
- How is fuel cost calculated?
- Why is diesel more expensive?
Even someone living under a rock will have likely heard about the rise in fuel costs in 2022. From the initial effects of Covid which had a knock-on effect on the microchip shortage, to the European conflict which caused a fuel and car shortage – fuel costs have taken a rollercoaster of changes. One thing hasn’t changed, and the question still remains: why is diesel more expensive than petrol?
Let’s do some digging…
Why is diesel more expensive than petrol?
Did you know that the wholesale price of diesel and unleaded are almost the same? This may be a shock to many people and it’s easy to see why.
At the pumps, diesel is around 10p per litre more expensive than unleaded. Which are leading consumers to believe that diesel costs more to buy.
Research conducted by the RAC tells us that the price of petrol and diesel at wholesale are very similar. So, we wanted to know, why is diesel more expensive than petrol in the UK?
One major aspect as to why diesel is more expensive than petrol is the fact it has to be imported from abroad.
Diesel is a heavier material due to having larger molecules.
So not only do we have to account for the costs of importing materials from abroad, but we must also consider the heavy weight of the product which is being imported.
On top of this, some countries use diesel as a heating fuel, so the competition for diesel is massive.
All of these factors contribute to why diesel is more expensive than petrol. But what else should you know?…
How many diesel vehicles are there on Britain’s roads?
The sale of diesel cars has plummeted by 52% since the start of 2022. In 2021, there were just 195,000 new diesel car registrations – that’s just 12% of all new cars registered.
There was an –85% change in 5 years for diesel from 2016 to 2021.
This is considerably beaten by petrol cars which make up 54% of new car sales in 2021.
It’s undeniable that this is down to the announcements of the Phase out of ICE cars (internal combustion engine vehicles) from 2030 onwards, which includes banning the sale of new petrol and diesel cars.
But why has diesel taken the hit more than petrol?
This is likely down to the effects of the controversial Volkswagen and the Diesel Gate event, which was when Volkswagen was found guilty of using software to manipulate the emission statistics of its cars. It was later found by the Environmental Protection Agency that the brand had sold cars that weren’t truly reflective of how earth-friendly they were.
The UK used to sell 26 billion litres of diesel each year, now this has changed due to the impact of the COVID-19 lockdown and the microchip shortage.
The majority of diesel fuel sales were because of large commercial vehicles’ diesel consumption, which made the numbers stack up massively.
What about now?
The annual demand for diesel in the UK is around 25.6 million tonnes.
It is estimated that there are around 600,000 diesel-consuming HGVs and 4 million diesel-powered vans on UK roads.
Even though there has been a MASSIVE reduction in the sales of new diesel cars, the number of diesel-consuming commercial vehicles on UK roads continues to grow.
So, the price difference really adds up for business consumers. That’s a lot of extra profit going into the hands of someone. It’s certainly not being shared with the consumers in any way.
Why do people choose diesel when it costs more at the pumps?
For years Brits have been encouraged to purchase diesel cars. Based on the knowledge that they are more economical for long-distance driving. The assumption was made that they are also more environmentally friendly.
In 2015, the government admitted that this was not the case. Confessing that diesel fumes are more damaging to our health and the environment.
As such, the days of diesel for the mass consumer market may be numbered. The government are under increasing pressure to reduce air pollution. So there have been talks about a diesel scrappage scheme to encourage motorists into more environmentally friendly vehicles.
Regardless of these events, motorists and diesel heads continue to opt for diesel. Possibly because diesel fuel allows 20% extra miles per gallon, so you can travel further in your car. Discover more about how to save more fuel while driving.
How is fuel cost calculated?
On average, a fuel retailer will make 22.16p per litre on the fuel they sell. This has been skewed somewhat with diesel costs soaring. Now, retailers make around 23.06p per litre on diesel and a margin of 21.27p per litre on unleaded.
It is rumoured that retailers are bolting costs onto diesel prices in order to keep unleaded prices competitive. The rationale behind this is that regular motorists are more likely to shop around for the cheapest petrol price whereas commercial road users are not. So, weighing the profit on diesel ensures they can remain competitive on unleaded prices.
It would be fairer all around if each fuel was retailed based on its wholesale price. But when do corporations care about fair? 2014 saw UK motorists benefit from a three-year low of 130p per litre.
This was a result of wholesale prices reducing because the GBP was performing well against the USD and forecourts passed on that saving. This is no longer happening.
UK drivers are also subject to fuel tax. UK pump prices overall are some of the world’s highest because 52.95p in every pound spent at forecourts is tax.
So, the average retail price for diesel is now a whopping 186.13p per litre, of which 83.97p of this is taxed – that’s 45%!
Tax is charged at an equal amount across the fuel types with petrol, diesel and even cleaner Liquefied Petroleum Gas all losing 52.95p to the pound in tax. So, this isn’t a contributing factor to why diesel is more expensive than petrol.
Supply and Demand
Although the demand for personal diesel vehicles has plummeted in 2022, the demand for diesel-consuming commercial vehicles continues. UK-based refineries have faced a problem with supplying the demand. Sadly, the British oil refinery market is simply not geared up to tackle such vast volumes.
Because of this, we are forced to import from other markets. Other markets abroad like Russia have higher import rates. This is one contributing factor to the increased price of diesel fuel.
Why is diesel more expensive?
So, there are a number of reasons why Britain’s fuel prices are higher overall, but these haven’t yet explained why is diesel more expensive than petrol in the UK.
There are more drivers of unleaded vehicles than there are drivers of diesel vehicles. Appealing to the majority is key business mathematics. Not only that, more diesel is sold in the UK than petrol.
This is due to the volume of commercial vehicles in the UK using diesel power. Business motorists are less likely to shop around for better forecourt prices and therefore retailers increase the price to make a bigger profit.
Simon Williams, of RAC, said in their report: “The difference between the two is quite often 5p a litre. We as a nation of motorists are far more focused on petrol prices and therefore there is a perceived benefit from a retailer’s point of view in keeping petrol prices lower for the country’s 20 million petrol car owners than it is for the 10.7 million diesel car drivers.”
As diesel is the primary fuel used by commercial vehicles in the UK the additional cost is a heavy burden upon businesses and small business owners.
In a recovering economy, penalising the businesses that provide services and employment to aid in economic recovery seems counterintuitive but it all boils down to profits.
Put simply, diesel is more expensive than petrol because fuel retailers have found a solution to making big additional profits without the risk of losing customers.
*(all information correct on the 16th November 2022).
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