Apologies if this has been done to death before. I was wondering why diesel is significantly dearer that petrol - is the tax different? Does it cost more to refine? Or is it supply and demand?
Am I right in thinking that it is cheaper on the continent? So how do they manage it?
Peanut
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Diesel used to be roughly the same price as unleaded then diesel cars became very popular and I believe the tax on the fuel changed hence the differential - some would say to balance the loss of tax (from cars using less fuel) to HMRC . This time of year the demand for central heating oil pushes the price of diesel up a bit more.
Most European countries recognise that diesel is less environmentally damaging than petrol, mix it with 5% biodiesel and tax it less.
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It may have slightly less in direct tax on Diesel fuel but Germany like most EU countries gets it back in yearly car tax you need to be doing 35000km a year to break even on a Focus and the esculating tax has just about made older second hand 4x4's extinct with road tax costing more than the cars worth.
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"Most European countries recognise that diesel is less environmentally damaging than petrol, mix it with 5% biodiesel and tax it less."
Kinda sorta. Depends if by "environment" you mean the old CO2 chestnut or the air people breathe in the street.
From the AA website:
LPG and diesel give out less CO2 than petrol cars
LPG and petrol cars give out less toxic emissions than diesels
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I was wondering why diesel is significantly dearer that petrol ........
It could be for all sorts of reasons. Perhaps in this country petrol benefits from the economies of scale ~ the greater the production output of any item the lower the unit price becomes.
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As I understand it Diesel costs less to refine and is easier to store. Any price difference is do to HM Govt. Someone may be able to find the HM site which gives actual tax levels per litre which are applied.
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Direct tax on diesel is lower among our nearest neighbours in Europe because the oil reserves they draw on yield more diesel, so diesel was taxed lower to encourage its use.
The fractions of crude oil that are "cracked" to make diesel also give kerosene, heating oil, jet fuel etc. Seasonal demand of any of these affects diesel prices. (US sellers stockpiling for the summer holiday season causes the seasonal change in petrol prices). So, with more diesel cars on UK roads, the effects of supply-and-demand are more readily seen.
Here in Ireland, petrol is still preferred except by those doing 15-20,000 miles a year, and the price of diesel remains 2-5 cent/litre below that of unleaded most of the year. A worst, they'll cost the same (currently E1.18/litre near me).
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Diesel is premium priced because of demand - rising sales of diesel cars has stretched supplies - refineries can't simply switch from petrol to diesel production, it takes years of planning and £billions.
The price of diesel is about the same as unleaded in the summer but a differential opens up during winter as demand for diesel as heating fuel kicks in.
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The rates of duty on petrol and diesel are EXACTLY the same
tinyurl.com/ypj2ff
The difference in price is a supply and demand thing solely. The diesel is a heavier cut and has more uses, so more demand, so more money. In summer the price differential is usually much lower.
In other EU countires the rate of taxation on diesel is lower as they recognise the burden on hauliers.
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www.hmrc.gov.uk/budget2007/pn02.pdf
Sorry that link is out of date, this shows exactly the same thing though
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Interestingly the duty on LPG went up 35%. They kept that one quiet!!
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Yep, taxation is identical.
Diesel fuel used to be little more than a by-product of the refining process to make petrol. Also, when taxation was much lower, the margins on petrol were higher, so making diesel look cheap.
Therefore, retailers sold diesel much cheaper than petrol to encourage demand.
Now that diesel powered cars are so numerous (and tend to be driven by high mileage drivers) and there is little margin on fuel sold at the pumps, the price of diesel cannot be easily discounted relative to petrol and there is more demand for diesel than supplied by normal refining.
This means that other oil products need to be cracked (expensive process) into diesel but there is also high demand for those products, so demand hits both ways.
To a certain degree, for selfish interests, if you drive a diesel it is in your interest to encourage everyone you know to drive petrol cars to keep demand down! ;)
This site has more info on how fuel is made:
tinyurl.com/2cq29q
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If fuel was sold buy weight then diesel would be even more expensive.
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That is an excellent link. Thanks Oilburner, I remember some of the details from School (twenty odd years ago), but this was fantastic.
I seem to remember that it is a shortfall in refinery's for diesel (along with the obvious other markets) that mean that Diesel is more expensive
When I consider my 2 current cars though. I achieve approx 31-33mpg in my 2.0 petrol Bora on Average, and around 42-46mpg in my 1.9 Touran. So I get an impressive 33% (More or less) better fuel economy, against a <5% fuel cost difference.
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VW Bora (51) 2.0 SE
VW Touran (54) 1.9 TDI
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Yeah, strangely, the refineries were caught out by the increase in demand for diesel. Seems quite obvious, at least with hindsight! :)
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Plans are afoot to build a new 200,000 barrel-per-day refinery in Teesside that will specialise in making diesel. I doubt it wil reduce the cost of diesel though, since it will probably be 5+ years before it comes on stream, and it is reputedly going to cost £2 billion....
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RichardW
Is it illogical? It must be Citroen....
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Yes and there is a small matter that the 2 blokes planning to build it havent got any money yet!
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I am trying to keep my prejudice against diesel at bay here - but my understanding was that it did get taxed more than petrol as a result of it's popularity - our government is good at that. They claim they tax it less because it emmits less CO2s and then when half the country have bought one - it jacks the tax up - ha gotch ya !! - Well done Mr Brown.
Diesel emmissions are about to get tougher soon anyway because they pollute alot more than petrol (yeh I know here I go again - but it is a fact) and so the cars will be even more expensive to buy.
Of course there is now the tough new targets imposed by the EU that will make cars more expensive generally - and whilst they moan about it you can bet your bottom dollar all the costs will be passed on to you and me by the car companies - they will still do very nicely from it - they will just blame the EU for the price increase.
I digress but it remindes me of the current credit crunch as the logic is similar in a way.
Mr Top Bankers says - I know we need to make more money - lets lend loads to people who can't afford it. Charge them a bit more interest cos they are risky folk them without any dosh.
When they can't afford it the credit crunch starts to bite.
Right we now have a problem - how are we going to pay those massive bonuses in the city now. Dead easy really - lets increase all our charges to those that can afford it and they will fund our profits and bonuses. - Easy this banking lark.
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But now you have read the above posts, although a good hypothesis, it isnt actually true.(the bit about the tax I mean)
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Don't be so sure.
www.petrolprices.com/why-diesel-costs-more-than-pe...l
Edited by Pendlebury on 20/12/2007 at 13:46
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I would tend to trust the official government site as opposed to the one you posted. Just to clarify......
Fuel duties
All fuel duty rate changes will take effect from 1 October 2007.
Pence per litre
(unless stated)
Ultra-low sulphur petrol/diesel 48.35p +2p 50.35p
Sulphur-free petrol/diesel 48.35p + 2p 50.35p
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Maybe I just do not trust this government and it's figures as much as you do.
In fairness to you the previous Chancellor always kept taxation very simple and was always open and upfront about how he charged us taxation so you must be correct.
There were never any smoke and mirrors used and we do pay significantly less tax now anyway.
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Yes point taken Pendlebury, I don't trust the government either!! However I doubt even this government would say it taxes both petrol and diesel at 50.35p and then not.
Of course what Richard says is right with the VAT differing slightly on the more expensive product.
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Agreed PR - I just took the post as an opportunity to have a go at the government - nothing directed at you by the way.
I'm just feeling that way about them at the mo.
Edited by Pendlebury on 20/12/2007 at 16:29
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Diesel does in fact carry more tax than petrol - but only by virtue of the fact that is more expensive pre-tax, and therefore attracts more VAT.
The argument about the 'cleanest' fuel is somewhat clouded (no pun intended) - all are orders of magnitude better then 30 years ago. Diesels win on CO2 and CO (none in diesels) and hydrocarbons. Petrols appear to win on NOx, but in general NOx stays constant through a diesel engine's lifetime, whereas it increases (to above diesel) in petrol engines. Diesels produce more PM10s (the visible particles), but about the same (or less) PM2.5 - and there's plenty of research to suggest that PM2.5s are much worse then PM10s for you. The only emission test required for a diesel at MOT is smoke opacity - a petrol needs CO and HC. And you can't get away from the fact that a diesel burns approx 30% less fuel (by volume) and is 30% more thermally efficient - so less wasted energy.
Having said all that, I'm not at all sure I want to buy into a Euro V diesel just yet.....!
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RichardW
Is it illogical? It must be Citroen....
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Am I right in saying that the differential is greater in winter due to greater demand for diesel for heating fuel? Capacity for refining diesel is fairly static so with demand signficantly higher in winter the price is pushed up by a few pence?
I've heard that somewhere, not sure where, no idea if its true!
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