On The Relative Prices Of Petrol And Diesel

On The Relative Prices Of Petrol And Diesel

I have a question about the economics of fuel prices, and I’m sure one of you clever folks will be able to help.

I was just reading the BBC News website, and saw this story predicting that UK fuel prices could reach a new record high over the Easter weekend. That surprised me, as I was certain I could remember paying around 10p per litre more than current prices during the summer of 2008.

In an effort to check my memory, I scampered over to http://data.gov.uk and searched for “fuel prices”, which led me to this page on the Department of Energy & Climate Change website offering an Excel spreadsheet detailing weekly average fuel prices.

An aside – I thought the whole point of http://data.gov.uk was for the data to be available on that site, in an open, queryable format? Most of the search results seem to be nothing more than links to Excel 2003 spreadsheets or (worse) PDFs hosted across dozens of disparate government websites? Oh well. Excel works for me, and it’s a start I suppose.

Anyway, having downloaded the spreadsheet, I charted the prices of both unleaded and diesel over the past three years:


So my memory wasn’t playing tricks on me. Our Toyota runs on diesel, and sure enough back in summer 2008 it was costing me over 130p/litre to fill up, compared to around 120p/litre now. But the news article wasn’t fibbing – it talks specifically about the price of unleaded petrol, which was 120p/litre both at the previous peak and now.

It seems that the differential between the price of petrol and diesel grew as high 15.09p at one point in December 2008, but has all but disappeared now. Here’s another graph showing the premium that diesel owners have been paying, per litre, since summer 2003:


So, the question I have is – why did this price differential between the price of petrol and diesel arise between 2007-9, and why has it diminished again now?

Oh, and for my US readers – yes, you read it right. We really do pay 120 pence per litre for gas, or $6.90 per US gallon. Count your blessings!