Chapter 1: What are the current trends in petrol and diesel prices?
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Podcasts, radio, news, music and more. Welcome to Fuelcast. I'm Carrington Clark and this is your source to stay on top of the numbers behind the ongoing energy crisis. It's Friday, April the 24th. We're recording mid-morning. Let's dig in. The price of Brent crude has risen again, currently sitting at around $106 a barrel.
Since we last checked in, the average national price of unleaded has dropped to $1.91 per litre, and the national average price of diesel has dropped to $2.72 per litre. Today, I'm joined by Alan Kohler to dig into today's major energy headlines. Good morning, Alan. Good morning, Carrington.
Alan, we're about to go into a long weekend for some of Australia, and I wanted to kind of look back at the last public holiday that we had, the Easter long weekend, to see how we're sitting when it comes to fuel prices. So I looked back. The price of unleaded was around $2.30 back on April 3rd. Today, as we said, is about $1.91. It was about $1.80 before the conflict began.
Now, diesel is also lower than it was. It was around $3.10 for the Easter long weekend. It's now sitting at $2.72 per litre. But it was less than $1.90 when the war began. So it raises the obvious question, why is it that we've seen the price of petrol not rise as much as the price of diesel during this conflict?
Well, diesel has gone up twice as much as petrol because before the war, it was already in tight supply around the world. And it actually got in much more tight supply as a result of the war, partly because when we talk about 20 million barrels a day coming through the Strait of Hormuz, that's not just oil. That's a combination of oil, diesel, jet fuel, petrol.
And the actual proportions of those aren't really published, but quite a lot of that is diesel coming through the Strait of Hormuz from Middle East refineries. There's about 70 refineries in the Middle East, most of them, dozens of them, clustered around the Persian Gulf. And they make a lot of diesel and a lot of jet fuel and a lot of that just comes through the Strait of Hormuz.
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Chapter 2: Why is diesel pricing significantly higher than petrol?
So obviously what's happening now is that that supply of diesel is not coming through out of the Persian Gulf. And also the oil that is produced in the Middle East is suited for producing diesel in Asian refineries so that the refineries that we get our diesel from in Singapore and Malaysia and Korea and so on they use Middle Eastern crude mainly to make their diesel.
And so that's also been cut off. So there's been a much bigger drop in the supply of diesel than there has been from petrol. So while America is trying to increase its production of diesel in the American refineries, it's not enough. They just can't produce enough. But there is quite a bit more coming out of America. The other problem is that...
China imports a lot of diesel from the Middle East and also Middle East and crude to have in its own refineries to make diesel. But they've now banned exports of diesel to keep their own supplies going. So, you know, all up the supply of diesel has really been choked off.
It's making that 200 million barrels that Australia was able to secure look even more precious, isn't it? And we've spoken previously about perhaps the first crunch will be jet fuel, but diesel looks like it might be the next big one to be potentially a supply issue even here.
Yeah, well, the thing to bear in mind is that diesel is the fuel of commerce, whereas petrol, you know, just fuels cars, really. But diesel is used, obviously, in truck transport, in mining, in agriculture, and it's much more difficult to reduce the demand for it. I mean, it's much less flexible than petrol.
People are able to catch public transport as opposed to drive, but really the trucks have to still carry the products. You know, crops still have to be planted and harvested. Mining has to go on. So the diesel demand is much less flexible than petrol. And the other thing is that diesel is about 10% or 15% more dense than petrol. It's got more energy in it.
If you compare them by weight, they're about the same energy supply. But by litre, because diesel is heavier... there is much more energy per litre in diesel, about 10% to 15% more. And so that's why it's used so much in commerce. So all things considered, you know, diesel supplies have been cut off much more than petrol, and also the demand is less flexible.
Alan, I noted that the US President Donald Trump in a social media post said he has all the time in the world. He's under no time pressure when it comes to negotiations with Iran. Now, that might be just posturing, obviously, ahead of these negotiations. But how much time does the global economy have when it comes to this supply shock on oil?
And are we reaching that crunch point where things are really going to start hitting the skids?
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Chapter 3: What factors are affecting diesel supply globally?
And that's based on emotion and what the traders think is going to happen. And what they're doing is they're trying to anticipate what's going to happen in a month or two months' time. And I think they pay far too much attention to Donald Trump's outpourings.
Yeah, I think in the end, markets are believing that Donald Trump will ultimately decide to do what's best for the stock market effectively and that eventually political reality will set in with him. But at this point, you have to say that he does not seem to have a clear way of getting out of this predicament.
And while he might still be looking at the stock market and thinking, well, everything's okay. It's a kind of bizarre feedback loop, isn't it, where the markets are assuming that he's going to eventually do the right thing, for want of a better terminology, and get the straight back open. But he's looking at the stock market and saying, well, they think it's fine.
So actually, maybe we don't need to do anything. Extraordinary set of circumstances. Alan, thanks for joining us on Fuelcast. And you can catch That's Business with Alan Kohler later today. Who will you be chatting with, Alan?
Well, today it's the CEO of Viva Energy, which owns the Geelong oil refinery, which caught fire. And when he learned about the fire, it was 11.15 at night on Wednesday night, and he, Scott White is his name, the CEO of Viva, was actually in a meeting with the manager of the oil refinery. They have a meeting, and then the notification came through about the fire.
No.
So he didn't get any sleep that night. He had to go straight down to Geelong.
um but um so that was interesting but but really i talked to him about what's what's going on now um how much what's the impact of the fire and also more broadly about how he sees the oil market and the diesel and petrol market um and uh what's going to happen so he's a bloke who's kind of right in the middle of things and um i think it's well worth well worth taking um 35 40 minutes to have a listen
Yeah, absolutely. It should be fascinating. You should not miss it. So we will be back in your feeds with all things Fuel next week. See you, Alan.
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