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The reason for the set price of diesel is partly to do with refinement processes.

You gave the correct explanation to PW of Leicester regarding the price of diesel. To expand on it, the fraction of the barrel that the diesel comes from has nothing to do with the price. As you wrote, it’s all about supply and demand. Considering that in a normal North Sea (low sulphur) crude oil barrel, the diesel/gasoil component is less than that of the petrol component, there is an imbalance in what you have and what you need. PW is also wrong to suggest that diesel requires less production processes than petrol. Historically in the UK, diesel cars were unpopular but as diesel engines became more refined and economy gains became greater, their popularity has increased to the point where there can be twice as much gasoil than petrol leaving the refinery.

Since the EU introduced laws regarding the sulphur content of road fuels, refineries have struggled to match the (higher) cost of low sulphur crude oil to their capacity to de-sulphurise the gasoil and have sought to import low sulphur gasoil feedstock from (normally) Russia. Buying cheaper high sulphur crude oils didn’t work because very few (if any) refineries had sufficient desulphurisation plant to run on 100 per cent high sulphur crude oil. Before 2000, most refiners could get away with re-processing only a small portion of the gasoil, leaving the main fractionating column in order to produce diesel (before 1994 the gasoil from North Sea crude oil didn’t need any). Subsequent decreases in the level of sulphur permissible in diesel and now dyed gasoil means that all gasoil components leaving the main fractionation column need de-sulphurising.

In the late 1980s the sulphur level in diesel and dyed gasoil was 5000 parts per million (or 0.5 per cent). It is now 10ppm for both grades. To desulphurise gasoil to this level of sulphur concentration requires very severe (high temperature/high pressure) processes and the process units capable of this level of desulphurization are therefore expensive. The low profit margins on refining have dissuaded many refiners from making investments in desulphurising plant, given that it probably costs in excess of £200m to build a plant that will de-sulphurise gasoil at the rate of 100 tonnes per hour just to satisfy EU laws. Gasoil is not used as heating oil in the UK. It’s more expensive in the first place and there is then duty to pay on it. There is no duty to pay on kerosene when it is used as heating oil. Please keep the source of this information confidential.

Asked on 19 May 2012 by XXXX, via email

Answered by Honest John
Very many thanks for the detail. Another factor is tax. In France the pump price of diesel is 47 per cent tax. In the UK it is 60 per cent tax.
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