Why motorists are paying high price for diesel

RACQ Motoring Advice explains the cost difference between fuels.

With unleaded petrol prices having dropped to record lows, the RACQ Motoring Advice team has been questioned why diesel motorists were not given the opportunity to equally benefit from the low prices. 

There are two factors that are leading to the high price of diesel compared with petrol. 

Firstly, the fuel company indicative retail margins are unusually high on diesel and we are seeing indicative retail margins on diesel that are about four times higher than petrol. 

Fuel companies have used the recent falls in the oil price to bolster margins on diesel rather than pass the savings on to motorists. 

Given the current oil price and diesel wholesale price, retail diesel for sale in Brisbane should be no more than 105 cents per litre. 

Secondly, the wholesale price of diesel is substantially higher than petrol and it is supply and demand that have the largest influence on wholesale prices, far more than production costs (which are very similar for petrol and diesel). 

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Due to the COVID-19 restrictions, demand for petrol has collapsed (in Australia and worldwide), however demand for diesel has remained relatively high as it is largely a fuel of industry – the trucks are still shipping goods and the mines are still producing. 

Supplies of diesel are relatively low. Oil refineries generally produced a fixed ratio of petrol to diesel, which is based on the crude oil they were designed to refine. 

A typical refinery in Australia produces about twice as much petrol as it does diesel.

It is the imbalance between supply and demand that has pushed up the diesel wholesale price. 

RACQ has welcomed a recent new Australian Competition and Consumer Commission’s (ACCC) report on the profitability of the fuel industry in Australia, and encourages motorists to support fuel stations that are offering a fair price to motorists. 

Motorists can shop for the cheapest fuel in their area via the RACQ Fair Fuel Finder.