Diesel pricing pain
The demand for oil burners is faltering, writes PAUL GOVER
THE growing demand in Australia for leaner diesel cars could dip dramatically as the pump price of diesel rises faster than that of unleaded. More carmakers are citing the price differential as a potential threat to sales of diesel cars.
‘‘Fuel price rises will not go away. We’re at the cusp of diesel now,’’ Saab Australia boss Parveen Batish says.
Saab has just landed a new diesel for its 9-3 range, but Batish says its potential could be blunted by the high price of diesel.
It’s a similar story for everyone from Audi to Volvo and Volkswagen.
The German company became a big winner in recent years when sales of diesels jumped from less than 1 per cent to more than 8 per cent and many people were won over by their lower CO2 emissions and greater mileage to the litre.
But the price gap between unleaded and diesel fuels has widened in recent months, often to more than 30 cents a litre. Diesel now costs even more than premium unleaded, and it’s raising questions.
Carmakers are not convinced the difference is necessary. Owners and potential buyers are asking why the price of diesel is rising so high.
And it’s not just an Australian problem. Many European countries — including Britain, a traditional stronghold for diesels — are being hit by similar price rises.
‘‘ It’s a global trend. It’s because of India and China. Industry, heavy industry, runs on diesel fuel. And that’s what India and China are kicking off. There are unprecedented demands on fuel, exponential growth,’’ independent motoring expert John Cadogan says.
‘‘For every day on planet Earth only a finite supply of crude oil comes out . . . and it can’t be pulled out any quicker.’’
Cadogan rejects suggestions that diesel fuel costs more to produce or that Australia is competing for some sort of base crude oil to produce its low-sulphur diesel. But he says there is competition for the crude needed for jet fuel.
‘‘Only a portion of a barrel of crude oil is suitable for jet-fuel production. Diesel comes out of the same fraction of crude as is used to produce kerosene and jet fuel. So if more jet fuel is produced, you get less diesel. So we have a finite supply at the same time as the demand for jet fuel is going through the roof.’’ Cadogan also says there is no incentive in Australia to discount diesel fuel.
‘‘Petrol is aggressively discounted at the retail level. The average retail mark-up on a litre of petrol is about 3.5 cents. The retail markup on diesel is 10 cents a litre.
‘‘With total consumption of petrol in Australia each year in the order of 20 billion litres against about 8.5 billion litres of diesel, there is less incentive to discount diesel.’’
Expensive alternative: rising fuel prices globally are gradually making diesel models like this Saab less appealing.