Fuel price jump piles pressure on farm costs

Red diesel prices have soared by at least 15% since before Christmas, adding considerably to farmers’ costs.

Delivered values averaged 61p/litre in December, according to the Farmers Weekly/ NFU Inputs Price Monitor. That was 8p/litre more than November, but covered a massive variance, from 52.4p/litre to 79.95p/litre. “The wide range demonstrates how quickly prices rose,” said Peter Garbutt, regulatory affairs adviser at the NFU.

Traders blamed the cold weather and tight global supplies for the rise, but were split on where they thought future prices would go.

John Ringwood at farmer-owned supply co-op ACT said prices had rocketed as soon as the snow arrived early in December. Kerosene and red diesel values rose by up to 20p/litre as deliveries from refineries and distributors were disrupted, at the same time as demand soared. “We took 10-times more orders in the first two weeks of December than we normally would; we were inundated.”

About 80-85% of business was kerosene for domestic heating, but red diesel prices tracked the rising market, he said. “In more than 30 years it’s the first time I’ve seen kerosene more expensive than red diesel. But some of the fuel companies took advantage – there were immense inconsistencies of up to 15p/litre in similar areas. There was also an element of using price to reduce the number of new orders.”

Kerosene and diesel values had fallen since the peak, said Mr Ringwood. “The panic is over now. Prices are still 8-10p/litre more than in the last week in November, but I’d certainly say that the trend is downward.”

However, with crude oil values 13% higher than three months ago, at $95/barrel and winter not yet over, the downward trend could be a slow one.

Nick Adamson at Oxfordshire fuel distributor, Ackerman & Niece, said oil and diesel values were simply tracking bullish commodity markets.

“No doubt it will correct itself and fall again, but it will only be by a small amount. Opec wants a crude oil price of between $80 and $100/barrel, so if the price goes too high it will come under pressure to increase supplies.”

A burst pipeline in Alaska, which supplied 15% of US oil, had added 0.75p/litre onto red diesel prices almost overnight, he added. The move to low-sulphur diesel and the increase in fuel duty and VAT had also contributed to rising costs.

“The increase in fuel duty has added 0.15p/litre to red diesel since 1 January,” said Mr Garbutt. “In the next month or two the market still looks bullish, so it is worth shopping around to see what deals you can get. Longer-term, it all depends on the crude oil price and whether production quotas are increased.”

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