Petrol vs diesel: the Atlantic divide
In time-honoured fashion, the price of road fuel is soaring just ahead of a holiday weekend. The oil industry rarely misses an opportunity to deliver itself a public relations shot in the foot but this one is curious because it is the price of diesel that is soaring, more than petrol, and it is a systemic problem. We know the oil price has been high, peaking last week at $111 (£55.27) per barrel, and pump prices have risen in tandem but since the beginning of January the cost of diesel has risen at twice the rate of petrol. There is a shortage of diesel in Europe - some petrol stations have actually run dry - and the problem is there are just too many diesel cars.
The average UK retail price of petrol has risen from 103p per litre to 106.8p per litre since the new year but diesel has raced ahead from 108p to 114.3p. Normally, diesel drivers pay a smallish premium of 2p to 4p per litre over petrolheads but it has now escalated to 7.5p as supermarkets scramble for scarce cargoes. This may be a sign that a long-running shortage of diesel in Europe is getting worse. A cycle of refinery maintenance shutdowns and an unexpected cold snap late in the winter has coincided to create a temporary shortage. In search of extra fuel, importers have been buying cargoes of diesel in America for shipment to Europe.
Underlying all this is a structural problem in the refining and marketing of fuels. Diesel is what oil refiners call a middle distillate. If a barrel of oil is sliced like a salami, the top slices, known as light products, are the gases, such as propane and butane. Below that is naphtha, used to make petrol, followed by kerosene which is used in jet fuel. Gasoil is the next big slice in the barrel and is the raw material for motor diesel, marine diesel and heating oil. At the bottom of the barrel is heavy fuel oil, used by some power stations, and bitumen. The challenge for refiners is to match products with demand: while Europeans prefer diesel, Americans love petrol, but refineries produce both products in similar quantities.
What we have then is a continuing battle with petrol shortages in America and diesel shortages in Europe. A clutch of refineries at Milford Haven in Wales do a brisk trade by importing crude oil from West Africa and exporting cargoes of petrol to the United States. These vessels are now returning with motor diesel for British consumption. Western Europe has a burgeoning demand for diesel - about half the cars sold now in Britain are equipped with diesel engines and about a tenth of annual consumption is imported, much of it from refineries in Russia and the Baltic region.
There is a new plant under construction, including Total’s investment in a new distillate hydrocracking unit, that will convert high sulphur crude into clean diesel, and huge refining investments are underway in the Gulf where the oil rich states have noticed the coincidence of European oil product shortages with public abhorrence of smelly oil refineries. Soon, we will not just be dependent on the Arab nations for crude oil but for the manufacture of road fuels, plastics and many other industrial products. The sad truth is that we still need these things but we don’t want to see them, pay for them or even know about them.
Source: Times Online
Tags: europe, petrol vs diesel, price comparing