Will we see diesel above 2 euros again?

Will we see diesel above 2 euros again?

It is hard to believe what, for some time now, we have seen when we go to a service station: diesel more expensive than gasoline… including 98. The historical trend has undergone a 180 degree turn and diesel, a fuel used by 57.9% of the cars in our country (42.8% in Europe) are close to their historical maximum. Will we see diesel above the two euro barrier again? We can bet yes.

The data is what best explains the situation that diesel is experiencing in our country, although in the rest of Europe the panorama is not very different. So far this year, diesel has experienced a rise of 42.6% compared to that of 95% gasoline, which is being 16.8%: it remains to be seen how these percentages change until the end of 2022.

A roller coaster

In summer, specifically in the months of August and September, the price of diesel gave drivers who have vehicles with this type of engine a break. However, after that parenthesis, the upward trend has returned. The increase that it has been experiencing since October means that filling a diesel tank is more expensive than a year ago: the extra cost is, despite the state discount, about 20 euros.

And as if the outlook were not serious enough, industry forecasts suggest that there are possibilities that by the end of the year the price of diesel exceeds, without problems, the barrier of two euros. Currently, according to the latest available European Union Oil Bulletin (11/03/2022), the average price of gasoline in Spain is 1.76 euros per liter: this represents a decrease of 0.17% compared to the figures last week, but an increase of 10.6% since the end of February when the war in Ukraine began.

Above two euros

The average price of diesel, meanwhile, stands at €1,971 after a slight decrease of 0.1%: since February, yes, it has increased by 33.3%, that is, three times more than gasoline. Thus, filling a 55-liter diesel tank costs 108.41 euros compared to 96.80 euros for gasoline.

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Although the average price of diesel provided from Brussels has not exceeded two euros, in some service stations it has: Prices have been seen that ranged between 2 and 2.1 euros, although we are talking about figures prior to the application of the Government’s 20-cent discount on fuel. Be that as it may, it was a situation that had not occurred since last May.

The main cause: the shortage of diesel

Reviewed the numbers, we go with the reasons that have led us to them. And there is one reason that stands out above the rest: the shortage of diesel. These days, several economic media collected the statements made by Josu Jon Imaz (CEO of Repsol) during the presentation of the company’s results: “We are running out of middle distillates in some European countries.” His words did not invite hope: “We can see high diesel prices in the coming months.”

Europe is not the only one in trouble because, according to Bloomberg, The United States would only have diesel reserves for about 25 days. A situation that occurs at a time of the year when the demand for fuel grows due to special celebrations and festive periods that are yet to come, such as Christmas.

production cuts

Scarcity is not the only cause with which we can explain the increase in the price of diesel. The decisions of the Organization of Petroleum Exporting Countries (OPEC) in current and future figures, as we will see later. After announcing a cut of two million barrels per day, in one week the average price of diesel at gas stations rose ten cents passing, thus, from 1,814 to 1,914 euros per liter.

Russian exports

There are other reasons that we have already told you about on other occasions: dependence on Russian exports is one of them. About 60% of Europe’s diesel came from there, but the sanctions against this country after invading Ukraine have caused the supply of this fuel to decrease while the demand has remained. The result? Less diesel and more expensive. A situation that promises to worsen when, at the beginning of 2023, the prohibitions of the European Union come into force.

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The situation of European refineries

Throughout the last decade, In Europe, 24 refineries have closed: Most of these facilities that have ceased their activity were focused on the production of diesel, but they had to make the decision because diesel was not profitable. With this movement, 10% of the production of this fuel has been lost and this has also caused bottlenecks to be created in the refineries that are still active because many of them are not prepared to transform all types of crude oil. This slowdown in the refining process has resulted in higher prices.

The price of natural gas

your quote has multiplied by ten in the last two years for two main reasons. The first is the inflation of diesel itself that we are talking about: thinking about winter, several industries (agriculture, energy…) have shielded their gas reserves and have replaced it with diesel. The second is that natural gas is essential for the process of transforming oil into diesel.

Winter

Although the official date for the arrival of winter is December 21 and there is a month and a half to go, the preparation to face the coldest months of the year has already begun. Diesel is a primary fuel in Europe: not only for the transport of people and goods by road or sea, but also for homes and for sectors such as construction or industry.

The price of diesel

One of the factors that most influences the price of diesel is its international market price: in the case of Spain, the Northwest European Market (located in Rotterdam) and the Mediterranean Market (located in Genoa) are taken as reference.

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Other elements that come into play are the wholesale cost of the fuel that, according to the calculations of the Spanish Association of Petroleum Product Operators, represents 49% of the price of diesel, taxes and distribution costs (38%) as well as the margins of the wholesalers (13%).

The price of diesel in the future

We do not intend to play Nostradamus with something that affects us all, but we do know that certain actions can aggravate the situation that diesel is experiencing. We told you before OPEC has decided to cut its daily production target by two million barrels: It is the largest reduction they have announced since May 2020.

However, the International Energy Agency (IEA) has pointed out that, in reality, it will not be two million but, approximately, one because, today, most OPEC countries are producing below their assigned quotas. Most of that cut will be borne by Saudi Arabia and the United Arab Emirates.

This change in figures does not minimize the consequences that this movement may have. It has already caused an increase in the cost of oil, which may go higher since the price of a Brent barrel to be delivered in December has already hovered around 92 dollars (€94.26, based on current exchange rates) on the London futures market. Let us remember that it was last March when it reached its maximum with a figure of 128 dollars and that, since then, its value had fallen by 31%.

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