Diesel could stay expensive for five years even if crude oil falls
Economist Saul Eslake warns the gap between crude oil and refined fuel prices could keep diesel expensive for three to five years, even if crude falls back to US$60-70 a barrel.
The spread between crude oil prices and refined diesel prices has more than tripled, reflecting higher profit margins for refiners. Crude oil is now above US$100 a barrel, but the real problem is what traders call the crack spread: the difference between crude and the finished fuels we buy.
Refineries in the Persian Gulf are isolated and much of Russia's refining capacity has been damaged. This gap has grown for these reasons.
Economist Saul Eslake told a farming forum on the Gold Coast that even if crude fell sharply, the refining constraint means diesel will stay high. Global supply is being squeezed by interrupted shipping through key straits and damage to Ukraine's grain ports.
The Australian government cut fuel excise earlier this year, but that may not help if high prices persist for years. Transport, farming, mining and agriculture will feel the pressure on profits.
- Above $US100 a barrel
- Crude oil price
- More than tripled
- Crack spread growth
- 12 months and possibly beyond
- Expected pressure duration
Why it mattersFarmers, truckers and mining operators need to plan for sustained fuel costs, not temporary spikes, to protect their margins.
AustraliaAustralian agriculture, trucking and transport face years of higher diesel costs that will squeeze profit margins across the sector, even if crude oil prices fall.
✓ Claims checked against the source. checked 1 h ago
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