Diesel pric­ing pain

The de­mand for oil burn­ers is fal­ter­ing, writes PAUL GOVER

Herald Sun - Motoring - - News -

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.

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