Why are diesel drivers subsidising petrol buyers?

Do you drive a diesel car or van? Well, watch out – you’re probably paying over the odds for your fuel.
Garages and forecourts have been accused of hiking the price of diesel by up to 6p a litre to make up for poor margins on petrol sales. And that means they are adding more than £3 to the cost of filling up a diesel car, or £4.80 for a van.

Cheques and balances

Edmund King, AA president, said: “Cars are like blank cheques for whoever feels the need to balance the books by plundering drivers’ pockets. “And now the fuel retailers are taking £3-a-tank extra on diesel to steady their finances.”

Oiling the wheels

Petrol prices are also on the up, with the typical cost of a litre rising from 111.92p in mid March to 113.29p in mid April. And all this while wholesale oil prices continue to fall!
  • In the first two weeks of March, oil averaged $58.50 (£39.31) a barrel.
  • In the opening fortnight of April, the cost of a barrel was just $55.70.

Rise and fall

So why are fuel prices going up while oil prices are falling on the international bourses? Does it prove that retailers are cashing in on both petrol and diesel drivers? After all, the cost of filling up a 55-litre petrol tank has shot up by 75p in the last month. And since February, petrol prices have risen 7p a litre – pumping up the cost of filling up by £3.50 a time.

Crude statistics

But it’s not that straightforward. Even though the oil price has fallen when priced in dollars, the value of sterling has itself fallen against the dollar. That means oil costs more for UK processors and retailers. http://moneysupermarket-3.wistia.com/medias/od6lx1lc8p?embedType=seo&videoFoam=true&videoWidth=600 The change in exchange rates has meant that, while £1 bought you $1.511 in mid March, it got you just $1.481 in mid April. In, er, crude terms, that means a $2.80-a-barrel fall in the oil price translates into a 1p-a-litre increase at wholesale level, which inevitably feeds through to the pumps.

Pump action

So it seems no-one is faring particularly well at the pumps at the moment (although prices below £1.20 are still around 10% less than this time last year). But even the Petrol Retailers Association confirms that diesel drivers are being used to subsidise their more numerous petrol-purchasing counterparts. A spokesman said: “Currently, the margin available on petrol is extremely low – and so higher margins may be taken on diesel.”

Cutting remarks

The RAC, which has accused fuel retailers of taking diesel drivers for a ride, is calling for diesel prices to be cut by 4p a litre. Simon Williams at the RAC said: “Retailers have maintained a higher margin on diesel, perhaps to subsidise petrol sales.” But rather than calling for price cuts, the AA wants the politicians jostling for our votes to make both petrol and diesel pricing more transparent for the UK’s 35 million drivers. “Motorists prop up the Treasury to the tune of 10% of the UK’s total £582.6 billion tax-take,” said Edmund King. “But the need for fair pricing on UK forecourts has so far been largely ignored by politicians. A commitment to pump price transparency would be a good start.”

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