Why British Diesel Drivers Can Rejoice for First Time Since 2001

  • Diesel cheaper than gasoline for 1st time in 14 years
  • U.S. gasoline demand, European diesel glut behind shift

British diesel drivers 1, gasoline guzzlers 0.

U.K. motorists with diesel-powered cars are enjoying a rare treat. For the
first time in 14 years, the fuel costs less at the pumps than gasoline and the situation should persist at least a few more months.

The U.S. is sucking increasing amounts of gasoline from Europe, where consumption of diesel has been lackluster, according to Petromatrix GmbH, an oil-consultant. Meanwhile, diesel prices are being cut as the amount stored by independent companies in Europe rises to the highest for the time of year ever, according to PJK International, a firm that monitors inventories.

“The U.S. market determines the price of gasoline,” Olivier Jakob, the Zug, Switzerland-based managing director of Petromatrix said by phone. “The supply/demand balance in the U.S. has been very tight and that has pulled up prices in Europe, including in the U.K..” Prices will probably “even out again” when the U.S. gasoline demand switches to the type that’s suitable for winter, he said.

Retail diesel dropped below gasoline at the pump at the end of July for the first time since 2001, according to Experian Catalist, which has been providing pump prices for the U.K. since 1993. It’s stayed lower ever since, European Commission data show.

Gasoline cost GBP1.17 ($1.82) a liter in the U.K. on Aug. 21 while diesel was GBP1.14, according to European Commission data.

While most of European countries have a lower tax on diesel, the U.K. has the 
same duty for both fuels meaning that diesel has typically been more expensive than gasoline, or petrol as it is more commonly known, according to Paul Whatters, a spokesman for the Automobile Association, the U.K.’s largest motoring organization. Europe produces more gasoline than it consumes while it relies on imports of diesel from countries such as the U.S., Russia and India to meet its demand requirements.

As well as the switch to winter gasoline, increased heating demand across Europe in the coming winter months will also help reverse the trend because diesel is now an almost identical fuel to the one that’s used to keep homes warm.

The recent plunge in crude oil prices, with Brent crude falling to the lowest in more than six years, will see pump prices both fuels in the U.K. fall by another 2 pence a liter in the next few of weeks, according to Whatters.

“While prices are likely to drop further, once demand for heating kicks in, diesel is likely to return to being more expensive than petrol as heating oil is taken from the same spectrum of a refinery as diesel,” he said.