Diesel Vs Unleaded Price - Why The Huge Difference Now?

CrocDundee on 22/04/2020 - 13:54
Last edited 04/05/2020 - 16:40 by 1 other user

So I was wondering… Why has the price of Diesel not come down as dramatically as Unleaded Petrol over the last couple months. From my understanding (which is very basic) Diesel is actually cheaper to refine/manufacture compared to Unleaded Petrol?

Over the years Diesel has always stay around the avg price of 91+ Unleaded depending on it's price cycle. For example, U91 would fluctuate between $1.30 - $1.50 over any given week or two and Diesel would be about $1.35-$1.40 during that same period.

Now that we are seeing the price of Unleaded petrol drop as low as $0.70 and yet Diesel seems to be at it's cheapest, $0.99?! That's 40% more expensive!! Are the petrol companies finding a new way to rip us off seeing as they are not making as much profit with Unleaded so just making up for it with their Diesel price? Either way, as a newly Diesel running car owner, I am not happy!

Your thoughts or any insight would be great to hear/read.

• 

  [Deactivated] on 22/04/2020 - 13:57

  +3

  Freight is still continuing very strongly but passenger cars are mostly off the roads.

  • 

    CrocDundee on 22/04/2020 - 13:59

    I get that, but freight companies usual pay with a fuel card and tied into one of only a few big companies where they can purchase fuel/Diesel. Generally speaking, those big freight companies would be receiving some form of discount when purchasing Diesel, correct? Still doesn't justify the big difference in price now imo…

    • 

      abb on 22/04/2020 - 15:37

      +2

      Demand for Diesel has not dropped as much as Petrol. Economics 101.

      Talk of fuel cards and discounts is completely irrelevant.

      • 

        CrocDundee on 22/04/2020 - 15:44

        I can understand that. Is there a way to find out accurate demand levels for both?

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  Cluster on 22/04/2020 - 14:05

  +5

  There are a few reasons.

  Most diesel consumed in Australia is used by trucks, buses, miners, farmers, trains, and the military. Retail sales comprise a relatively small percentage of diesel sales. From memory, retail liquid fuel sales are around 66% petrol, 25% diesel, with LPG making up the rest. That means it takes longer for prices to adjust to the oil cost because volumes are lower. Diesel also has no fuel discounting cycle like petrol, where petrol is sometimes sold below the terminal gate price.

  The other thing that people believe is that diesel is naturally cheaper/less refined. It's just a different fraction of a barrel of oil. It still has additives added and actually has less sulphur than petrol in Australia (10ppm maximum compared to the rather lax standard of 150ppm for 91 unleaded). Diesel is also a commodity that gets traded separate to petrol, so supply and demand drive the price independently of petrol.

  Edit: https://www.abs.gov.au/ausstats/[email protected]/mf/9208.0

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    CrocDundee on 22/04/2020 - 14:11

    Good information! Thank you. I am one of those that was of the understanding that Diesel is cheaper to refine over Petrol. Are you saying it isn't cheaper? I get that it is different, obviously, but always thought it was a cheaper process compared to Petrol. Thanks again for the insight!

    • 

      Cluster on 22/04/2020 - 14:15

      You can check out the terminal gate price for your area here: https://www.aip.com.au/pricing/terminal-gate-prices

      I drive a small diesel car and hope diesel hurries up and becomes cheaper like petrol. 82c/L in my city for petrol versus 95c/L.

      • 

        CrocDundee on 22/04/2020 - 14:23

        You and me both! I haven't been driving as much and don't really anyway seeing as I can walk to my place of work each day. That link wouldn't open for some reason for me. I'll try a different browser…

    • 

      currentfad on 22/04/2020 - 15:12

      Per unit it may be cheaper, but economies of scale means they can achieve lower costs on larger scale production.

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    fantombloo on 22/04/2020 - 16:14

    Diesel price here has been stable for years even while gasoline has fluctuated wildly. I can't think of more than a 20c (maybe even 10c) fluctuation at the same servo over the last few years at least

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  elgrande on 22/04/2020 - 14:14

  Deisel contracts are locked in for longer term.

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    CrocDundee on 22/04/2020 - 14:24

    What time frame comparison are we talking about here? 1 month (Unleaded) compared to 3 months (Diesel) or 1 day compared to 5 days etc…

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  Mechz on 22/04/2020 - 15:10

  +1

  Diesel used to be cheaper because it was less refined, now it's more refined than standard petrol. There's also only about half as much diesel per barrel of crude than petrol.

  "Crude oil is placed in a distillation column, and then heated to allow more volatile petrochemicals to boil off while the remaining chemicals remain in liquid form. Propane and gasoline are boiled off and collected first, followed by diesel, lubricating oil and other products. The diesel collected at this stage is fairly cheap, but it's full of sulphur and other pollutants. Once extracted, this diesel is further distilled and refined to reduce these potential pollutants. The resulting refined low-sulphur diesel burns much cleaner, but it's also much more expensive."

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    CrocDundee on 22/04/2020 - 15:47

    Interesting! So the refining process has changed over the years that the difference in cost is now negligent compared to petrol…From a refining process only. not wholesale cost.