Red diesel prices spike by 60% as supplies remain tight
© GNP Red diesel prices in the UK have skyrocketed following conflict in the Middle East, with prices lifting by more than 60% in the past month.
Prices collected by Farmers Weekly averaged 109p/litre in mid-March, up from 67p/litre in February.
However, farm businesses have been quoted a wide variety of prices, anywhere from 100p/litre to 135p/litre plus, with some questions being raised about potential profiteering within the supply chain.
See also: Fuel and fertiliser prices soar as Middle East tensions rise
Several farmers have also queried why red diesel appears to have lifted more rapidly than road diesel and petrol.
Red diesel is taxed at roughly 11p/litre, while petrol and diesel are taxed at about 53p/litre.
This lower fuel duty on red diesel means price movements can feel sharper as the wholesale cost of the fuel makes up a greater proportion of the retail price.
Fuel merchants told Farmers Weekly that prices for red diesel are still increasing by several pence a day, with supplies exceptionally tight.
However, merchants stressed that there was no immediate cause for concern, with stocks still available and being replenished even if they were proving slightly more difficult to get hold of.
Red diesel is reportedly on strict allocations from UK oil depots and refineries, with product having to come from other sites.
Merchants have advised farmers to keep fuel tanks on farm filled and not to let supplies run down, suggesting the situation is not necessarily going to be getting any better in the short term.
Sarah Baker, head of economics at the AHDB, said: “The elasticity of supply in red diesel is much more inelastic, and therefore even a small increase in demand will influence the price.
“The reason it’s less elastic is because it’s got a smaller UK supply base. They don’t hold the massive stocks that the big players do for forecourt diesel.”
Ms Baker added that since April 2022 restrictions were placed on what red diesel could be used for, and it was now predominantly used for agriculture, which had resulted in much lower usage demand, and therefore much reduced stocks.
The situation has been exacerbated by high seasonal demand from farmers due to improved weather and spring applications.
Defra farming minister Dame Angela Eagle has raised industry concerns about prices of fertiliser and red diesel with the Competitions and Markets Authority.
She said: “We are actively monitoring the developments in the Middle East and the impacts for our food and farming sectors, including ongoing discussions with industry leaders to gather evidence.
“We are committed to ensuring that these markets function fairly and we stand ready to act swiftly and appropriately to support our domestic farming industry and food security.”
Fuel prices
RAC head of policy Simon Williams said: “The average price of a litre of unleaded [petrol] has now risen by 6%, or nearly 8p, to 140.6p/litre since the start of the conflict and is at its highest in 18 months.
“Diesel has rocketed by 12%, or almost 17p, to 159.2p/litre, a price we’ve not seen since November 2023.”
Theft warning
Rural insurance firm NFU Mutual has urged farmers to ensure fuel tanks are secure as oil prices continue to rise, with concerns that thieves may target farms.
Hannah Binns, rural affairs specialist at NFU Mutual, said: “Thieves steal whatever they can get their hands on and sell on for a profit, and high diesel and heating oil prices often trigger an increase in thefts from farm fuel tanks.
“Farmers are reporting that red diesel for use on the land has increased from 77.95p/litre to 135.98p/litre and heating oil for homes has doubled.
“Fuel theft is a crime which often leaves a trail of destruction as thieves frequently smash valves and even drill into tanks to get the oil out. This can lead to pollution as any remaining oil seeps into the ground.”
