7 September 2000

A new surge in the price of agricultural diesel has caught many farmers by surprise, fuelling suspicions that oil companies are subsidising petrol sales.

Crude oil prices continue to rise, and a barrel is now worth over $30 a 50% rise in 12 months. Although the Organisation of Petroleum Exporting Countries agreed to pump more crude earlier this summer to ease prices, this has had little effect.

Prices rose by 15% in August alone. But critics point out that the increase is not being shared out equally, suggesting that oil companies are placating the public by charging less for petrol but more for derv and agricultural diesel. A year ago, red diesel cost 12-13p/litre and petrol cost about 76p/litre. Now petrol is priced at about 80p/litre, but red diesel has surged to 21-24p/litre.

Derv prices have also climbed, with hauliers having to pay 65-70p/litre, up to 30% more than a year ago. The Dump-the-Pump campaign in early August may not have been the most successful boycott, but it certainly raised the profile of petrol pricing, says NFU transport adviser Mark Bratt.

There is concern, in farming and industry generally, that there is a tendency to ratchet prices up on bulk diesel. We need more even distribution across every fuel user.

Extra costs in the supply chain are the main concern. With almost 49p/litre of the cost of derv being duty, the government could easily cut costs, says Mr Bratt.

The NFU also intends to tackle the oil companies over the rising cost of red diesel, he says. Many farmers who refilled their tanks before harvest would have paid about 18p/litre. They are now having to pay 21-24p/litre. A spokeswoman for BP admits the retail market is very, very competitive, but says that petrol and diesel are separate commodities.

An easing of the international petrol market, rather than consumer pressure, has reduced pump prices recently, she says.

OPEC ministers meet again on Sept 10. They face mounting pressure to pump more oil after a week that saw French hauliers and farmers, angered by high fuel charges, blockading oil depots and refineries.

The action brought some parts of the country almost to a standstill. On Wednesday, the French government offered to cut fuel taxes.

Traders suspect any OPEC increase will be too small. Brent values for October rose to a 10-year high of over $33/barrel, and International Petroleum Exchange forward prices show only a slow fall. Diesel prices will almost certainly be sustained at this level through the winter, says Mr Bratt