75ZT Community

... a plausible explanation as to why diesel is currently some 12p per litre more expensive than petrol please?

Supply n demand...

Because it's stinking dirty carcinogenic produce of Satan.

raistlin wrote:... a plausible explanation as to why diesel is currently some 12p per litre more expensive than petrol please?

Always has been more expensive in winter, due to the fact that it's essentially heating oil.

Recently has been consistently more expensive than gasoline due to supply and demand, as Zeb says.

In France the tax on diesel is far lower hence diesel is cheaper. Apparently, it is to assist those living in rual areas who mostly use diesel

It's the usual taxation con. Before diesel was so popular and such engines were very much in the minority, the fuel was much cheaper than petrol.

Then came a massive swing towards diesel engines as the cost of petrol surged and diesel became more attractive from an economic point of view. Pretty soon it was obvious that so many cars had diesel engines the tax take was shrinking and the Treasury complained about the differential. It was felt that with so many motorists now committed to diesel, comparatively few would change back to a petrol engined car and so the price differential was eroded in successive Budgets.

Now of course it's a fait accompli. That fits neatly into the French question by the op. France is much more of an agriculrural country than we are now and there are millions of farm vehicles dependent on cheap diesel. The French authorities dare not meddle, the farmers and truckers are notorious for chucking spanners into State machinery. And it just shows how selectively blind the 'Greens' really are about particle pollution.

Politics and uncertainty over crude production effect primary prices dramatically. That said the $100 a barrel mark only held through April and May this year as the American Driving Season kicked off, contemporaneous with the 'Arab Spring', and the Libyan Civil War stoking fears over supply. Only at the beginning of this month did it spike again to $100.96, currently it's fallen away to $93.53.

During refining, the companies can selectively alter the barrel mix, by a process of Catalytic Cracking. The 'Towers' involved in this are infamously expensive, as are the chemicals involved. In the past decade demand for light residual fuels (Derv) has increased, but gasoline still retains it's place as the prime product along with the other lighter end grades such as Kerosene for aviation gas and heating. In this way the heightened cost to the refiner to produce more of the lighter grades reflects upon the residual end of the barrel.

The oligoliptic pricing forces (see vertical integration) of the refining majors has proven they can elevate (DERV) prices with the market sustaining consistent consumption; withstanding only ephemeral protest blips in demand, post pump increase.

The refiners set the grade prices, and these are reported in the 'Glasses' guide of the downstream Industry known as 'Platt's Oilogram'. Politically the gasoline market always receives amelioration, as the drivers, in their majority, cry loudest.

Domestic Derv consumers are fewer, and whilst prices rises do lift commercial distribution factors, increased payloads, (whether roadbound or maritime) help defray manufactured and natural product finished prices.

Presently retail pump values are reflecting the crude increase of 3 weeks back, and will in my opinion persist until after the holiday season!

Simultaneously as world demand increases, exploration and recovery costs escalate as the search for black gold goes deeper & deeper. The Majors create the need for advanced working capital by raising the barrel price, now mimicked by other utility suppliers.

However, always remember that Oil Companies are not really in the oil business, but the oil shortage business!

Bernard wrote:Because it's stinking dirty carcinogenic produce of Satan.

you can go off folk you know

Same thing with cooking oil innit... Three years ago it was 35p a litre off the shelf, . Then they made it legal to use in a car provided you didn't exceed 2500 litres per annum..And I started running my ZX on 25% diesel 75% cooking oil.. And now all veg oil is virtually the same price as diesel....
...

All the extra delivery vehicles on the road at this time of the year and the goverment making sure they aren't losing out on taxes?

MN190 wrote:All the extra delivery vehicles on the road at this time of the year and the goverment making sure they aren't losing out on taxes?

See my earlier post of 20-12-11. It's all about tax, first to middle to last. Squalid reasons are used to slide things through such as:
'Oh, we must reduce our carbon footprint so we'll reduce car use by increasing the tax'. No we won't, we'll just find it from somewhere.
'We'll reduce congestion by charging every car a tenner to drive through London even if they don't stop'. Congestion reduced? You tried driving in London?
When the tax take becomes embarrasing, and only for the plebs of course - government cars everyone else pays for, whack it on the licence disc.
And the 'Insurance Premium Tax'.
If there is any doubt, work out how much of your £1.33 per litre (more for diesel) is actually tax. The garage makes about 1p per litre!

The Government will want to collect x amount of tax. Take it off fuel and they will put it somewhere else. Disregard where you are paying tax but the average person will pay the same amount of tax. Take it off fuel and they could stick it on ordinary foodstuffs. No doubt the argument would be those who have enough money to have cars pay for it on fuel meaning that it is not placed on foodstuffs which would affect those on the lowest incomes who cannot afford cars.

PaulT wrote:The Government will want to collect x amount of tax. Take it off fuel and they will put it somewhere else. Disregard where you are paying tax but the average person will pay the same amount of tax. Take it off fuel and they could stick it on ordinary foodstuffs. No doubt the argument would be those who have enough money to have cars pay for it on fuel meaning that it is not placed on foodstuffs which would affect those on the lowest incomes who cannot afford cars.

Yes, you are probably right, but I'm not suggesting removing the tax take from fuel (more later) - the op question was why derv now costs more than petrol. My answer is that the percentage of tax levied on the two fuels has gone from much lower on derv (to make it much more attractive) to a very different level now, because so many car buyers bought into the prevailing dogma of the time (20 years ago) that deisel was the way forward in terms of economy and sustainability. Both principles now being patently untrue on economy and serious doubts on sustainability.

So far as tax targets go, and this was not intended as part of my last post, there seems to be an apparent acceptance that government can tax as much as it likes, for as long as it likes, on whatever it likes, to pay for whatever it likes. Well, I beg to differ. There are dozens of gov. schemes and grandiose ventures, political catastrophies, and downright scams that nobody ever questions. They all have to be paid for yes, but I question the blind and absurd dumb acceptance of stupid priorities that get nodded through. Like the last government's PFI debacle with the NHS that results in idiotic examples like £14000 to pay for three garden lights in hospital grounds in North Staffs. There are thousands of examples, Education is another similar area, that are the result of dogma rather than economics where incredible amounts of OUR money is wasted, very often the result of lobbying by ex-political and civil service officals. Incidentally, no matter what the result, no-one ever loses their job or is disciplined! But, hey, who cares?!

Paul's question was why had the difference increased between Petrol and Diesel? Whilst the enlargement of the 'prime-cost' is swollen by taxation, it does not effect the origination of the 'gap' he asks about.

The differential between the grade costs is set by the refiners, who currently have altered the increment for reasons I earlier explained.

The 'Geometry' between grades, can only originate with the refiners, taxation is a constant factor across both Petrol and Derv - with no differential.

The retailer's margin depends of course who you are. Typically a small independent retailer (if you can find one) has a margin as follows; (figures are only demonstrative)

Per liter (pence)
59.00 Prime Cost of Refined Grade
57.95 Hydrocarbon Tax Duty
116.95 Total
23.39 Vat on cost & duty
140.34 Total Prime Cost Duty & Vat
145.00 Retail Pump Price

4.66 Retailer's Gross Margin

Less Direct Costs viz;
0.93 Vat on Margin
0.29 Evaporation

3.44 Retailer's nett before indirect costs
1.827 Credit Card Costs (1.8% on 70% of total volume)

1.61 Nett before other costs


There has been a disposition over the past 13 years to move from direct taxation to selective indirect. One of the reasons fuel taxes are an 'Exchequer Favourite' settles simply upon the ease of collection from the Oil Refiners (Hydrocarbon and the lions share of VAT). Not only are there few of them, but their credit ratings are at least the equal of the Government they collect for. Additionally they pay promptly, and on a regular basis, improving administrative collection costs and providing a constant inward cash-flow stream.

I believe the official line on this, when diesel first began to outprice petrol, was that there was a shortage of refineries able to produce diesel.

My limited knowledge of the process, GCSE Chemistry, taught me that the process produces all ofthe various grades of fuel, so I am at a loss how there can be a shortage of refineries for Diesel?

However, I believe somewhere 60% of all new cars sold in Europe are now Diesel, so I would personally go with greed, AKA Supply and Demand.

The refineries in the UK (of which there really too many) can produce middle distillate to satisfy all markets. Recently the shift 'out'of gas-oil to other products for heating has meant the oil companies have increased the price of Derv to cover this factor.

Being in a vertically integrated oliopoly (a state of limited competition with each other) means they can 'adjust' these market patterns, by controlling overall supply and demand to fit the moving matrix. Cost factors individual to other industries such as distribution, are jointly shared and reduced as product is moved around the UK in a pipeline, which they collectively own.

Think of bakeries sharing trucks to deliver bread, it wouldn't happen would it? The Majors simply 'swap' product with each other to different locations, treating the pipe as a railway line between various stations. Payment therefore is mainly in product, a mature way for competitors to co-operate.

However in my former Industries defence, their share of the income is subsidiary compared to the Government who create, produce, and invest in nothing to take two thirds of the gross.

That said, this 'milch-cow' for taxation would be hard to replace, and probably mean direct taxation having to rise significanly to cover the revenue loss to the exchequer.

They are greedy, and increasingly more arrogant, an unpleasant trait they share with almost every other hard faced enterprise in a world consumed by gain, at all levels of humanity.

Soooooo... when the oil really does start to run out, one of the important, albeit secondary impacts will be the transfer of taxation from fuel to other areas of the economy....we live in interesting times...

Zeb wrote:Soooooo... when the oil really does start to run out, one of the important, albeit secondary impacts will be the transfer of taxation from fuel to other areas of the economy....we live in interesting times...

All pay will be paid directly to the Government who will then issue pocket money to the person who has earned the pay.

To help clarify my posts to date, I've compiled this 3 Column table which practically demonstrates the movement of Hydrocarbon Tax between Unleaded and Diesel since 1989.

It makes interesting reading, draw your own conclusions.


Hydrocarbon Tax Changes

Date of Unleaded Derv
Change Petrol

14/03/1989 17.72 17.29
23/03/1990 19.49 19.02
19/03/1991 22.41 21.87
10/03/1992 23.42 22.85
16/03/1993 25.76 25.14
30/11/1993 28.32 27.70
29/11/1994 30.44 30.44
01/01/1995 31.32 31.32
28/11/1995 34.30 34.30
15/05/1996 34.30 34.30
26/11/1996 36.86 36.86
02/07/1997 40.28 40.28
15/08/1997 40.28 40.28
17/03/1998 43.99 44.99
09/03/1999 47.21 50.21
01/10/1999 47.21 50.21
21/03/2000 48.82 51.82
01/10/2000 48.82 51.82
07/03/2001 46.82 51.82
13/06/2001 48.82 51.82
26/07/2002 48.82 51.82
09/04/2003 48.82 51.82
01/10/2003 50.19 53.27
03/12/2004 50.19 53.27
01/03/2005 50.19 53.27
06/12/2005 50.19 53.27
07/12/2006 51.52 54.68
01/10/2007 53.65 56.94
14/08/2007 50.35 50.35
01/12/2008 52.35 52.35
01/04/2009 54.19 54.19
01/05/2009 54.19 54.19
01/09/2009 56.19 56.19
01/04/2010 57.19 57.19
01/10/2010 58.19 58.19
01/01/2011 58.95 58.95
23/03/2011 57.95 57.95

Reference Zeb's reply over taxation shifts. I think we could be in trouble far sooner than we thought over supplies running out. At best we have 40 years left, many say it will be less than 15. The trouble is that exploration companies express their discoveries with deliberate paucity. The industry still recoils from the Texas glut of the 1920's and what that did to pricing. In this way a clear picture is difficult to gauge, where quantitive values distort statistical actuality.

There is no one body with actually conglomerated World Reserve figures, only estimations. That said, those I know in exploration, hint that the reserves in the Caspian Sea alone are truly amazing.

Also early results off the Falklands are thought to be 'encouraging' reflected in the resurrection of the Argentinian claim for the Malvinas, and a virtual South American East Coast embargo on 'The Falklands Flag. However we have to bear in mind that the North Sea Fields only ever contributed 6% of British GDP at the apogee of production. Today it's shrunk to £250 billion.

That said with Stagflation haunting our broken economy with 0.09% growth, what a difference it would make to the balance sheet, and wouldn't Brussels like to control that!

Consumption is ramping up though. In the Northern USA alone, 71% of electrical generation is by fossil fuels. Coal at 52% largely satisfies that demand, (Oil 3%), but you can see why the USA is not too keen about 'Green' matters just now? Imagine what a 52% swing away from coal to residual oil would do to middle distillate (Derv) world market prices?

One frontiers well and truly behind us - cheap energy. Wars have been fought very recently over Oil, no matter how many have supposedly died in the name of Freedom ...