By Ian Ashbridge

RED DIESEL prices have soared on the back of higher crude oil values, boosting farmers” costs ahead of a busy forage season and harvest.

The London Exchange saw Brent crude values hit $56 a barrel on Tuesday, Mar 22, and red diesel values quickly rose to 34p/litre.

John Ringwood of nationwide supply co-op ACT said red diesel prices had followed the Brent crude market closely for several months. “This means a comparative rise in spot values to between 31p and 34p/litre.”

Since Jan 1, Brent crude has risen 30% and is now about 70% higher than the same time last year.

The Organisation of Petroleum Exporting Countries recently announced plans to increase production by 500,000 barrels a day in an attempt to cool prices. But demand from China and fears of disruption by protesting oil workers in Nigeria have fuelled the market.

“Six months ago, few would have believed Brent values would reach $40 a barrel. Even after September 11, 2001, it didn”t reach these levels,” said Mr Ringwood.

The hike represented a massive cost increase for farmers, he added. The news comes soon after Chancellor Gordon Brown”s budget announcement added an extra 1.22p/litre to red diesel duty, set to come into force on Sept 1 this year.

Nick Adamson, managing director of Oxon-based fuel dealer Ackerman & Niece, said the rise to 6.44p/litre duty was not in line with inflation. “This represents a 20% rise. I would expect to see prices in the high 20s to early 30s for the foreseeable future.

“Higher oil values will squeeze everyone”s margins, particularly hauliers”. Most are on fixed contracts and can”t raise fees accordingly.”

The Freight Transport Association”s Geoff Dossiter said the organisation had expressed its concern to the government and would continue to lobby hard. “The bulk price of white diesel is now about 73p/litre, even higher than the fuel crisis in 2000. And the decision to raise duty on red diesel is regrettable when the commodity price is so high. It”s a tax on industry.”

Jill Hewitt of the National Association of Agricultural Contractors said the news put members in a difficult position. “The bottom line is that contractors” prices will have to rise, but they will also have to protect their businesses. Higher red diesel prices will affect both farmer and contractor, and it”s something the industry has to face as a whole.”

Silaging costs could also rise as higher oil values inflate the production costs of bale-wrapping plastic. Traders say the hike could add 3-5 a roll.

ian.ashbridge@rbi.co.uk