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Saturday, January 28, 2023

Why will Diesel be more Expensive than Gasoline?

For the sixth week in a row, diesel is more expensive than gasoline. Its average price is 1,911 euros, its historical maximum, while that of gasoline is 1,878 euros, also the highest figure in history in Spain. The European Union Oil Bulletin presents these data, which represent the third week in a row of increases, placing fuels 2% higher than seven days ago. No one knows exactly when prices will come down, smoothed out by the 20 cent government discount 20 cent government discount , but what is very possible is that the diesel will never be cheaper than petrol again.

“The problem is that diesel has traditionally been cheaper because the subsidies for this fuel were greater than those for gasoline,” explains Antoni Cunyat, associate professor of Economics and Business studies at the Open University of Catalonia (UOC). With fewer subsidies, diesel becomes more expensive because “not all the oil is used to make diesel, but higher quality crude is needed and the one obtained according to what techniques -such as ‘fracking’ or hydraulic fractioning- is not useful”, he adds. “It takes more oil to make a liter of diesel than for one of gasoline,” he closes.

Diesel supply shortage

This week, according to the European Union Oil Bulletin, the price increases are again motivated by the rise in the price of oil, with a barrel of Brent , a reference in Europe, bordering 105 dollars and West Texas , a reference in the United States, the 103 dollars . It should be remembered that at the worst moment of the pandemic, West Texas traded negative. However, even if the price of crude oil fell, it would not directly mean that diesel did too. It all depends on the oil available to produce diesel.

“In the future there may be a problem in the supply of diesel because the higher quality deposits are smaller and lower quality oil will have to be used and production will be affected,” argues Cunyat, who admits that the war in Ukraine has accelerated This process. “By restricting oil from Russia – Europe’s largest supplier of diesel with 25.5 million tons, there is less crude oil on the market, the stock falls and that is why the price of fuel rises, especially diesel,” he says.

“This drop in the availability of oil, added to the fact that there is more low-quality crude than high-quality crude, causes the price of diesel to rise or remain the same even if the price of a barrel falls, because there is not enough to produce diesel,” he ends. 

The future of diesel

To a dark future fueled by illogical policies based on electoralism and flashy phrases rather than emissions and pollution data, there is a new problem for diesel , whose price may be doomed to remain above that of gasoline forever. . 

Market forecasts and Cunyat cannot confirm that this is going to be the case, but the UOC expert can assure that “ this is going to be the trend in the future unless new massive oil deposits are suddenly found. a lot of quality”. “The difference between the price of diesel and gasoline will be widening and will grow as the oil shortage worsens .”

At the time of writing this article, the cost of filling an average 55 liter tank of a diesel car amounts to 94 euros including the Government discount. If the bonus is not applied, which will be eliminated on June 30, the cost would skyrocket to 105 euros.

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