Diesel is getting more expensive than petrol?!!

In the last issue, I talked about diesel engines but this time it is about diesel itself. When we drive past gas stations in Japan, we used to see diesel sold JPY10～JPY20/L cheaper than petrol. But now a big change is happening in the prices.

“Petrol: JPY97/L, Diesel: JPY98/L”: while driving in the Tokyo area we have started seeing signs like this since the end of last year. It was usual that diesel was cheaper than petrol per litre but now this is not the case any longer and this is a headache for diesel car users.

It was around last summer in the Northern Hemisphere when the situation changed. According to the Oil Information Centre, there used to be JPY20～JPY25 yen difference between the prices of petrol and diesel per litre but since September last year the difference has been getting smaller & smaller and at the end of last year it was only JPY4. This information from the Centre is based on average prices, so depending on gas stations, some were selling petrol and diesel at same prices or some were selling petrol cheaper than diesel.

However, this “cheap petrol & expensive diesel” tendency seems to be happening worldwide. In Europe where a large number of people use diesel cars anyway, more and more people have switched to diesel cars after last year’s high petrol prices. This is because diesel is 20～30% more effective in mileage, and the demand for diesel got higher relatively. As a result, the prices of petrol and diesel swapped places in many countries. According to AA, a traffic information company in the UK, at last December, in 10 countries out of 18, the price of diesel was higher than that of petrol.

In Japan, thinking about the difference in the tax rates, it seems a crazy phenomenon. The tax rate on petrol is JPY53.8 per litre compared to the light oil delivery tax of JPY32.10 and the difference is JPY21.70. At the wholesale Spot Market in Japan diesel is sold at JPY40 before tax whereas petrol at JPY34. Based on this, diesel should be sold about JPY15 per litre cheaper than petrol.

The reason lies on the escalation of petrol prices. A lot of gas station owners say the same thing: “We did not have any choice but to drop petrol prices because of the large decrease in its sales”. In the middle of a sudden drop in the demand, they are trying to attract drivers by dropping petrol prices. Unfortunately it is only in petrol prices where competition exists: at an average gas station, the volume of diesel sales takes up only a few percent. Even if they drop diesel prices, they cannot attract many customers, so they have to exclude diesel from the price war.

Most logistic companies who use large amount of diesel have their own supply or are using petrol cards, they can purchase diesel at lower prices. So, non-commercial drivers who use diesel have to pay a high price because they are small in number.

Checking carefully, you might find some gas stations who sell diesel JPY10 cheaper than petrol, faithfully following the difference in the original prices but they are the minority. The business of gas stations is a hard one in which culling out and closing down happens very often. The situation could change dramatically for a long time to come.


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(Editor)
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