Asian demand still inflating local diesel prices

Diesel prices drop steadily over the past month, but frustrations remain over widening gap between petrol and diesel

By Samantha Freestone

Wholesale diesel prices have dropped steadily over the past month, in line with the cost of crude oil, but frustrations remain over a widening gap between petrol and diesel.

Melbourne operators were enjoying the cheapest diesel this morning at $1.29 per litre, according to figures from the Australian Institute of Petroleum.

Fuel data specialist Nathan Franklin from AIP supplier ORIMA Research says diesel is more costly than petroleum because of the market it is purchased in.

Franklin says the "underlying methodology" for the perceived price hike is that diesel is sold in the Asia-Pacific market, forcing prices up as countries such as China and India use vast quantities of diesel to fuel their booming industrial economy.

"Diesel is the dominant fuel in the Asian region and in recent years there has been a significant increase in demand, particularly as a result of the economic and industrial growth in China and India," he says.

Australian demand for diesel has also grown strongly on the back of the domestic mining and commodity boom.

Australian refineries must price their output to be competitive with Asian imports, a spokesperson from AIP says.

"To meet Australian diesel demand, over 40 percent of diesel is currently imported - mostly from Singapore," the spokesperson explains.

"The Australian wholesale price for diesel [called Terminal Gate Prices or TGPs] is closely linked to the Singapore price of diesel – not crude oil prices.

"The Singapore benchmark price of diesel plus shipping costs and Australian taxes represents almost the entire wholesale price of diesel – around 95 percent of TGPs."

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