Diesel drivers stung at the bowser

Victorian drivers paying too much for diesel amid COVID-19 diesel price dive.

As petrol prices have plunged to 16-year lows during the COVID-19 crisis, more than a million Victorian diesel drivers are getting a raw deal on fuel.

Despite wholesale diesel prices that dropped by as much as 35 per cent since the start of the year due to a collapse in global demand, the average price of diesel at Victorian bowsers has fallen at most only 21 per cent to just over $1.17 per litre.

RACV senior engineer vehicles, Nicholas Platt, says over the past few months retailers have enjoyed the largest diesel margins in ten years, rather than passing on lower wholesale prices to customers.

Although the gap has been narrowing in recent weeks, he says RACV analysis indicates diesel drivers should be paying at least 7 cents per litre less than current prices. (Check out RACV's Fuel Price Monitor to find your cheapest local fuel price.)

RACV research shows that while service stations have maintained profit margins of around 10 cents per litre on unleaded petrol, margins on diesel ballooned from around 11 cents per litre in January and early February, to 30 cents per litre in mid-April. Current margins are still around 17 cents per litre, much higher than the average for the first part of the year.

“We haven’t seen these kinds of margins on diesel fuel in the past decade,” he says. “There’s no explanation why the margins have increased so dramatically. People expect the full reduction in diesel costs to be passed on to motorists.”

He says the price disparity will be especially galling for motorists who choose diesel-powered vehicles on the understanding they are cheaper to run. “People who buy diesel vehicles are often budget-conscious because you get a lot more mileage out of diesel, and they will be feeling the price pinch,” Nicholas says.

“Sometimes people think of diesel vehicles as just trucks but there’s family SUVs, tradie utes, or light commercial vans for sole traders. In fact, one in four vehicles in Victoria is a diesel vehicle.”

RACV’s senior motoring expert Tim Nicholson says diesel vehicles accounted for 35 per cent of all new vehicles sold in Australia last year.

“While most buyers are still opting for petrol engines in their passenger cars and SUVs, the massive increase in ute sales in the past decade is responsible for the spike in sales of diesel vehicles,” he says.

“Virtually all dual-cab utes are powered by a diesel engine, including Australia’s top-selling vehicle, the Toyota HiLux, as well as the popular Ford Ranger and Mitsubishi Triton.”

Victoria’s consumer watchdog has called on service stations to pass on “appropriate” price reductions in diesel to motorists, but says there may be a reason retail prices have not fallen in line with wholesale prices. 

“As with petrol, there are lags between a change in wholesale prices and a change in retail prices, primarily influenced by the frequency of fuel stock turnover,” a spokesperson for the Australian Competition and Consumer Commission says.

“However, those fuel retailers that have been able to restock at lower wholesale prices should now be passing on further savings to motorists.”

*Based on average diesel prices from 21 May, 2020.