Last year we had hundreds of people write to us in Support asking why there was a 13ppl difference between petrol and diesel at the pumps. While we covered it briefly then, we wanted to explore a more in-depth look at why this happens and what causes it.
We’ll cover seasonal transitions, a bit about how the price at the pumps is determined as well as how the system works.
How the price at the pump is determined
You may have seen in the news this week about “7ppl rises expected” after the attacks on Saudi Arabia and wondered how long it takes for a significant event to be felt at the pumps.
First, let’s look at how oil comes from being drilled to the pumps itself.
Once the oil has been drilled it’s sold on the market and in the UK we trade Brent Crude. Oil is traded in dollars so events that affect the value of the pound or dollar can fall in our favour or out of our favour.
Now that a refining company has bought the oil it is taken to a refinery and using fractional distillation is split into all the products we use from bitumen for the roads to bottled gas. Petrol (or gasoline) is a much lighter fuel whereas diesel is denser and is taken from the “same bit of the barrel” as heating oil.
After the refining process has finished, then the fuel is sold on the wholesale market which retailers buy and then this is what is sold at the pumps.
Costs add up all the way through the line, and you can watch the video below to explain it further on how the price of fuel is determined.
Could diesel be rising?
Seasonally diesel rises every year from the end of September to spring the following year. This is to do with the grades of diesel used as in winter are more expensive than summer as they have more restrictive cold properties, such as cloud point, or cold filter plugging point.
Petrol goes the opposite way, as it shifts to a different Reid vapour pressure as cooler European temperatures allow lighter molecules to be used. This helps to widen the gap between diesel and petrol even further, as petrol can be manufactured for cheaper in winter. This change officially begins on October 1st, but the Platts cargo assessments, which reflect values of cargoes loading or discharging 10-25 days ahead from time of publication, make the change ahead of the date.
Another factor in this price spread is the peak driving season in the US is over so petrol demand has lessened meaning that prices can fall and also a greater price spread will happen.
So it’s not just because I have a diesel?
Not at all, it’s just unfortunate that the spread has been increasing recently as more and more taxes are lumped onto diesel drivers.
From ULEZ to drop off taxes at airports, everything is keyed towards the diesel driver paying out more. However, aside from getting rid of the diesel, there is not much one can do. There are some scrappage schemes available for low-income families but not for the general public.
The spread has been noted as the biggest since February this year as experts analyse the crack swap. Crack swap tracks the difference between the value of the refined product such as diesel or gasoline and that of crude oil. It’s a widely used hedging instrument that allows refiners, consumers and producers to lock in prices as well as serving as a measure of the forward market.
How to save money when driving
When driving a diesel car, especially as the pump prices are so high, you can improve your fuel consumption by following the below:
Don’t use unnecessary speed. The Department for Transport figures states you’ll use up to 9% more fuel driving at 70mph than you would at 60mph and up to 25% more fuel travelling at 80mph instead of 70mph. The faster you drive, the greater your fuel consumption. Set off a little before you need to, to avoid feeling rushed.
Don’t think slow driving is always best though. To drive well below the speed limit on motorways, etc, is dangerous. It’s also unlikely to save much fuel. Conserve momentum. This is as important for fuel consumption as not driving too fast.
Drive at the lowest speed you can, in the highest gear possible. Car manufacturers quote the most fuel-efficient driving speed as 55/56mph.
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What do you think of the price spread? Do you notice it yearly? What’s the spread near you? Let us know below.