Why is diesel more expensive than petrol?

Honest John Back Room » Motoring discussion
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Sun 4 Mar 2012 21:12
Why is diesel more expensive than petrol? - meditek2

Crude awakening asked HJ and he replied :-

Why does diesel fuel cost up to eight pence per litre more than petrol? It features a lower fraction of the crude oil from which it is made, requires less processing and is used in volume by commercial vehicles, so should be cheaper.

PW, Leicester

"It is also heating oil. Less of it can be refined from a barrel of crude than petrol, unless you employ some extremely expensive refining processes. The economics of supply and demand then decide the price."

I find this answer astonishing. Just what heating oil has to do with it I do not know and as for getting less diesel from a barrel of crude than petrol I am in disbelief.

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Sun 4 Mar 2012 21:28
Why is diesel more expensive than petrol? - jamie745

Just what heating oil has to do with it I do not know

Is it not obvious? HJ's answer was pretty clear. The diesel made in refineries is also used for heating oil - demand for which is higher in winter while diesel supply remains unchanged which leads to a higher price. Its very simple. Diesel is also a more dense fuel and you get less of it from a barrel of crude which is the same size regardless of what you're going to do with it.

Another factor is the VAT rate, its now 2.5% higher than it used to be and VAT is applied after the duty, retailer and product costs are added up so a rise in the diesel product price means the VAT applied is more - and if that rate of VAT is higher than it was, the difference in price will be higher.

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Sun 4 Mar 2012 21:40
Why is diesel more expensive than petrol? - daveyjp

"I find this answer astonishing."

Why? What do you believe is the reason for it?

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Sun 4 Mar 2012 21:43
Why is diesel more expensive than petrol? - colinh
Product
Gallons per barrel gasoline (petrol)
19.5
distillate fuel oil
(Includes both home heating oil and diesel fuel)
9.2
kerosene-type jet fuel
4.1
residual fuel oil
(Heavy oils used as fuels in industry, marine transportation and for electric power generation)
2.3
liquefied refinery gasses
1.9
still gas
1.9
coke
1.8
asphalt and road oil
1.3
petrochemical feedstocks
1.2
lubricants
0.5
kerosene
0.2
other
0.3


Figures are based on 1995 average yields for U.S. refineries. One barrel contains 42 gallons of crude oil. The total volume of products made is 2.2 gallons greater than the original 42 gallons of crude oil. This represents "processing gain."

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Sun 4 Mar 2012 21:45
Why is diesel more expensive than petrol? - colinh

Sorry about the formatting - couldn't alter it

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Sun 4 Mar 2012 21:57
Why is diesel more expensive than petrol? - unthrottled

It's simple supply and demand. The duty is the same for both fuels. However, the rapid rise in the proportion of diesel cars has left Europe with a glut of petrol and a shortage of diesel.

Diesel owners shouldn't feel hard done by. Even DPF Euro V diesel cars have more generous emissions limits than petrols and, as Jamie points out, a gallon of diesel is about 10% denser than a gallon of petrol, but is only 5% more expensive-so you're still quids in.

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Mon 5 Mar 2012 08:23
Why is diesel more expensive than petrol? - meditek2

Thanks for the clarification. Never realised that crude was so rich. Imagined that the petrol was a much smaller proportion.

Why are we not seeing vegetable oil used here? I see it gives better performance and is much cheaper?

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Mon 5 Mar 2012 09:08
Why is diesel more expensive than petrol? - unthrottled

Why are we not seeing vegetable oil used here?

Seriously? Vegetable oil production is about 1% of that of diesel production so its ability to displace diesel is pretty negligible.

Better performance? No way. The calorific value is lower, so economy and power are both down compared to dino diesel. Too viscous too pump properly when cold. Boiling point too high to work well with DPF regens.

Like LPG, there is little intrinsic interest in the fuel's properties, merely its taxation status.

Edited by unthrottled on 05/03/2012 at 09:08

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Mon 5 Mar 2012 09:12
Why is diesel more expensive than petrol? - Roly93

Thanks for the clarification. Never realised that crude was so rich. Imagined that the petrol was a much smaller proportion.

Why are we not seeing vegetable oil used here? I see it gives better performance and is much cheaper?

I thought the same, ie that there was proportionately much more diesel than petrol in most crude oils. In the late 70's & early 80's the oil companies built a lot of cat-cracker plants which I believe were largely designed to extract more gasolene from heavy fuel oils as that was where the demand was. I would question whether these figures are based on straight fractioning of crude or fractioning and cracking ?

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Wed 7 Mar 2012 21:34
Why is diesel more expensive than petrol? - Ernied

Not sure about red petrol , but red diesel sure is cheaper than the clear stuff.

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Thu 8 Mar 2012 00:37
Why is diesel more expensive than petrol? - Smileyman

Diesel is cheaper than Petrol is Europe, it is only the UK where it is dearer -

I think the answer is unrelated to heating oil, me thinks that as diesel is more economical than petrol the gov taxes it higher so to reduce the financial benefit over petrol and rake in more revenue.

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Thu 8 Mar 2012 00:42
Why is diesel more expensive than petrol? - jamie745

I think the answer is unrelated to heating oil, me thinks that as diesel is more economical than petrol the gov taxes it higher so to reduce the financial benefit over petrol and rake in more revenue.

No they dont. The duty rate is the same for both fuels and so is the VAT rate.

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Thu 8 Mar 2012 14:34
Why is diesel more expensive than petrol? - concrete

When I first trialled a diesel car for my company, a Sierra 2.3 in 1984, diesel was markedly cheaper than petrol. The main downside was availability at most filling stations or use the HGV pumps. Did HMRC tax petrol and diesel diffently then? Did they only start to equalise the duty when many fleets switched to diesel cars and they were losing out? Cheers Concrete

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Thu 8 Mar 2012 01:23
Why is diesel more expensive than petrol? - primeradriver

I think the answer is unrelated to heating oil, me thinks that as diesel is more economical than petrol the gov taxes it higher so to reduce the financial benefit over petrol and rake in more revenue.

The reverse is true. Diesel and petrol are taxed the same in the UK, but diesel is taxed preferentially on the Continent.

I doubt this situation will continue for much longer, now that attention is turning to electric cars and diesel cars are starting to outsell petrols.

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Thu 8 Mar 2012 08:53
Why is diesel more expensive than petrol? - Sofa Spud

Diesel oil was at one time a by-product of the refining process, and so was sold cheap. This, together with their greater economy, led to the gradual adoption of diesel engines in commercial vehicles from the mid 1920's on.

Now that all commercial vehicles and a good proportion of private cars are diesel powered, is it the case that the boot is on the other foot, and petrol has become the by-product, to some extent?

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Thu 8 Mar 2012 11:27
Why is diesel more expensive than petrol? - Roly93

The UK government have always had a policy of equalizing the cost of using one or other form of energy where possible be it for heating or road transport fuels. A few years ago heating oil was the cheapest way to heat a large home, but now this has been smahed by the rises in heating oil, so now gas is as cheap or cheaper.

Back in the early 80's diesel was much cheaper than petrol at the pumps, but then there was still little demand for diesel outside of the light and heavy goods market.

No most people in most parts of the western economy are buying diesel cars, the government have cottoned on to the fact that the ave 2.0L petrol car does 35Mpg while the avaerage 2.0 diesel car does under the same circumstances 47-48Mpg. The oil companioes know this also so although the TAX is ther same on both fuels, the product is still at a high price due to demand/supply unfortunately for us.

Personally I think air travel could be seen as too cheap and I would think this might be taxed more from a fuel perspective, not good news for those that like to fly on holiday but this may come too.

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Thu 8 Mar 2012 11:40
Why is diesel more expensive than petrol? - unthrottled

Personally I think air travel could be seen as too cheap and I would think this might be taxed more from a fuel perspective, not good news for those that like to fly on holiday but this may come too.

+1

Air Passenger duty doesn't even come close to being equivalent to road fuel duty. example long haul economy class flight of 18,000 miles (retuen trip). APD=£80.

Fuel used: say 90 miles per gallon per passenger = 200 gallons or 900 litres.

Equivalent taxation rate: 9 pence/litre

Taxation rate on road fuel. = duty on road fuel (50p) +VAT on the fuel and the duty ~70 pence/litre

And still Michael O Leary complains!

When transporting freight and commuting to work is penalised more heavily than frivolous foreigh holidays, you know priorities are very wrong.

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Thu 8 Mar 2012 12:20
Why is diesel more expensive than petrol? - carr

Buses get a fuel duty rebate which I think is about 40p a litre so commuting by bus is not seriously penalised by fuel duty.

Taxing air fuel will need international agreement, I don't doubt that the UK will be the first to sign up for any curbs on holiday frivolity.

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Thu 8 Mar 2012 13:14
Why is diesel more expensive than petrol? - unthrottled

Taxing air fuel will need international agreement,

I don't see why. You don't have to physically tax the fuel, just tax planes that land or take off on your territory which is how APD works. I don't think the UK willcurb it either, but it doesn't stop me not liking it!

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Thu 8 Mar 2012 14:49
Why is diesel more expensive than petrol? - Roly93

When transporting freight and commuting to work is penalised more heavily than frivolous foreigh holidays, you know priorities are very wrong.

Actually I wanted to say this but you are braver than me ! When you look around airports so many people are there just because its cheap so their frivolous journey is justifiable..Oops have I gone too far...

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