Why Diesel Is More Expensive Than Petrol Right Now - TopAuto

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Following September’s drop in fuel prices, diesel has become more expensive than petrol in South Africa due to limited global supply and a strong demand for this fuel type.

While this is a rare occurrence as diesel is usually the cheaper fuel, it’s not the first time it has happened.

In April 2008, during the global financial crisis, the price of diesel also skyrocketed past petrol with Diesel 500ppm at coastal rates being R9.25 per litre at the time, and Petrol 95 being R8.67.

Only in March of 2009 did diesel prices dip back below petrol prices, almost a year later.

Supply and demand

In many countries, diesel is generally the more affordable fuel type as it’s less refined than petrol and therefore cheaper to produce.

The prices of both fuels are highly affected by international oil prices, too, which explains why they almost always fluctuate together.

However, according to TreasuryOne, these factors are not playing a major role in diesel’s price dominance at the moment.

Both fuel types are currently about the most expensive they have ever been which is the result of high international oil prices.

But the reason for diesel’s stubbornness to stay above the R23 mark is not so much the input costs, but rather the simple rule of supply and demand, said TreasuryOne.

Due to the Russia-Ukraine war and the Eurozone approaching winter months, many market participants have been stockpiling diesel to use for machinery, home heating, and emergency supply.

Diesel also occupies a smaller portion of the market as most vehicles around the world use petrol.

This, in turn, has kept the prices of diesel from taking a considerable drop in September, while petrol did not experience the same price stickiness.

What about 2008?

CNN Money in May 2008 reported that high crude oil costs, similar to what we’ve been experiencing this year, as well as the demand for diesel from fast-developing countries such as China, drove prices for this fuel above petrol and caused governments to look for emergency interventions.

Additionally, the publication said that speculative traders were partly to blame for attempting to cash in on the rally in petroleum product prices thereby assisting in pushing them up.

While it’s not proven, it’s possible that this last factor could also be at play in 2022 due to the wider availability of the internet than 14 years ago giving more speculators the opportunity to get in.

When will it end?

The end of high global fuel prices is mainly dependent on the continuing war and the resultant oil supply from Russia, said TreasuryOne.

The company said the war must come to an end, or other countries must increase their oil output, for any meaningful change to occur in fuel prices.

While other alternatives are also being explored, few are yet advanced enough to be implemented, and if they are, it will still take a while before they manifest in the prices of fuel.

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