Diesel price cut should reflect wholesale market, insist RAC

Friday, June 6, 2014 - 12:00
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ISSUE: Do you feel diesel prices are too steep?

Fuel retailers should cut the price of diesel at the pumps immediately to reflect wholesale market changes, the RAC have insisted.

Wholesale diesel cost is now almost the same as petrol, yet average forecourt prices are still 6ppl more expensive.

On May 30, the wholesale price of unleaded was 103.5ppl while diesel was only half a pence more expensive at 104ppl; however, the average retail price of diesel was 136.26p – 6p dearer than petrol at 130.22p.

A year ago, the gap between wholesale prices was 2ppl, yet diesel was only around 4.5p more expensive than petrol at the pumps – leading the RAC to question how diesel can cost motorists so much today.

The RAC say that this means retailers are making 7.5ppl profit margin on diesel while the petrol margin is around 3ppl – equating to an extra £1.92 revenue on an average 55litre tank of diesel.

Simon Williams, Spokesperson at the RAC, said: “Transparent, fair fuel pricing is vital for the economy and to maintain the trust of motorists.

“While two-thirds of Britain’s 29million cars run on petrol we use twice as much diesel, around 26billion litres a year, which demonstrates how important it is to business through our 460,000 HGVs, 3.2million vans and all the diesel-powered company cars on the road which cover high mileages every year.

“In the last year retailers have been noticeably quicker to pass on reductions in the wholesale price to forecourts, but we are now seeing an unfortunate blip in that trend where diesel prices are higher than they really need to be.

“There has been talk of the fuel retailers using higher diesel prices to keep petrol prices lower, but whether or not that’s the case, the simplest way to operate must be to make sure retail prices always reflect wholesale prices proportionately.

“This has to be fairer in the long run for both private motorists and businesses alike.”

The price of diesel is likely to remain low in the coming weeks due to the start of the American holiday season.

As the US has far more petrol vehicles than diesel, petrol production will be boosted to meet the increased demand, causing a slight increase in petrol retail prices, which in turn narrows the gap with diesel pump prices.

“As we regularly see prices go up as a result of global demand issues it seems only fair that this annual drop in worldwide wholesale diesel prices caused by this little-known US petrol peak phenomenon should be reflected on UK forecourts,” added Mr Williams.

“Over the years we have been encouraged to choose diesel vehicles for environmental and fuel economy reasons which means they are the preferred option for many, particularly for businesses and high mileage drivers.

“Unfortunately, UK motorists now pay far more relatively for diesel than petrol because UK refineries are not geared up to meet demand and therefore we are subject to higher diesel prices as a result of having to import supplies from Russia and other countries.

“In the interests of fair play it would appear a good moment for our driver-friendly supermarket fuel stations or the big fuel companies to take a stand and cut the price of diesel in line with wholesale prices and give diesel car owners and business drivers a welcome respite.

“It’s also worth pointing out that some retailers are operating a more responsive approach to pricing that does pass on a bigger proportion of the diesel wholesale price savings to motorists.”

This year, motorists have enjoyed a three-year average petrol price low of 130ppl which lasted for 14 weeks from January 19 to April 28.

The low forecourt prices were a result of fuel retailers passing on savings in the wholesale price which had eased in mid-January to around 100ppl for petrol and 106ppl for diesel.

Tensions between the West and Russia over Ukraine, which began in early March and now appear to have eased, only caused prices to rise very slightly.

Unleaded is now 4ppl cheaper than it was a year ago and diesel is nearly 3ppl cheaper.

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