Rising demand for diesel leaves UK 'at the mercy of the global market'

17 September 2015

A gap between the demand and supply of diesel is set to increase, creating a growing reliance on imported stocks, according to charity the RAC Foundation.

It said currently, diesel is being sold twice as fast as petrol, but could be selling four times as fast by 2030.

In a report, Readdressing the balance between petrol and diesel demand, the RAC Foundation said demand for diesel has risen 76 per cent over the past 20 years. This compares with a 46 per cent decrease for petrol.

The report said the number of diesel cars has increased from 1.6 million in 1994 to 11 million in 2014, with the number of heavy good vehicles also rising again as the economy recovers.

The RAC Foundation warned some forecasts suggested demand for diesel would rise by as much as 20 per cent by 2030. At this stage diesel would outsell petrol by four litres to one. Some 45 per cent of the UK’s diesel comes from foreign supplies, while the UK is a net exporter of petrol.

The charity partly blamed growing dependence on imports on the closure of refineries, and the reconfiguring of older refineries to produce petrol rather than diesel due to prohibitive cost of retrofitting for the latter.

The report concluded closure of another UK refinery could pose very serious risks to security of supply unless there was investment in additional storage capacity and import infrastructure. It called on the government to address the policy issues identified in the UK Petroleum Industry Association report that would help the domestic refining industry to compete on a more level playing with international competition.

The government must also review all the issues affecting the robustness and resilience of the fuel supply chain, and the pace at which it is adapting to market changes, the report concluded.

RAC Foundation director Steve Gooding warned if action is not taken, the recent trend of falling fuel prices could reverse.

“Retrofitting [refineries] is a billion pound decision that has failed to stack up for investors who see refining as a low margin business despite our sky high pump-prices. The result: since 2009 three UK refineries have closed, and others have been up for sale.

“That leaves us at the mercy of the global market and much of the rest of Europe is in the same boat. We are having to look further and further afield for the fuel we need.

“Recently motorists have benefitted from falling forecourt prices. We should be concerned about the potential for things to go the other way.”

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