posted 3 years ago

Diesel Price Hits 5 Year Low

UK diesel price falls to 5 year low as demand in countries with a slow economy slashes the wholesale price.

Diesel now costs less than any time within the last 5 years, information group Experian Catalist revealed. On August 14th 2015, standard diesel averaged 112.48 pence per-litre which was the lowest since January 2010. Standard unleaded cost 115.07 pence, confirmed. This is a contrast to the historic trend where unleaded tends to be cheaper. Prices at the pump fell to reflect a change in the wholesale price that fell from $110 per-barrel in the middle of last year, to $50. Why? Because of supply versus demand. Countries such as China currently have a slow economy – and therefore require less fuel than in the past – but producers such as Saudi Arabia still have a vast quantity for sale.

David Hunter, an industry analyst with Schneider Electric, told BBC Radio 5 Live's Wake Up To Money programme: "Faltering economic growth in resource-hungry countries like China is keeping a lid on demand for oil, while on the other hand there is a supply glut". Mr Hunter added: "Saudi Arabia has ramped up production of ultra-low sulphur diesel for export to Europe” which caused “steeper falls for diesel than petrol."

A sluggish economy has a significant impact on how much fuel a country requires. The problem is that it is producing less wealth than during prosperous times which tends to mean there are fewer people in employment. There are, therefore, less motorists travelling between home and work and burning fuel. These people then have less money to purchase goods so the shops restock their shelves less often. This, in turn, means there are fewer lorries on the road delivering goods. Lorry drivers might then be made redundant so the economy continues to nosedive in a vicious circle. 

Low Diesel Price Could Benefit United Kingdom

The United Kingdom could benefit if the cost of diesel remains low long term. This would – assuming other factors remain equal – reduce the cost of delivering goods. Manufacturers then pay less for raw materials and their products could be transported to retailers for less. Savings could then be passed to consumers. Furthermore the cost of running taxis, buses, trams and trains would fall too. Motorists might then have more money to spend on (say) luxury items which might otherwise be too expensive. But low fuel prices might not last. James Hookham, Deputy Chief Executive of the Freight Transport Association, said: prices could go up as quickly as they are falling" because the market is ”very volatile”. 

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