Diesel drought risk 16 Sep 2015

Diesel pump

Gulf between UK supply and demand set to increase

Diesel is being sold as twice as fast as petrol and the mismatch is set to accelerate. By 2030 it is forecast that diesel could be selling four times as fast. 

This will leave the UK facing a growing gulf between the diesel fuel it needs and what it can produce, meaning a growing reliance on imported stocks.

Demand for diesel has risen 76% over the past 20 years (compared with a 46% decrease for petrol).

Forecasts suggest that demand for diesel will keep rising - according to some estimates by as much as 20% by 2030 - while demand for petrol drops. At this stage diesel would outsell petrol by four litres to one.

In 2013, 45% of the UK’s diesel needs was already being met by foreign supplies (whereas we remain net exporters of petrol).

Our growing dependence on imports is partly down to the closure of refineries.

In 2009 there were nine major refineries in the UK. Today there are six and several of these have been or are up for sale.

The imbalance is also due to some of the older refineries being configured to produce petrol rather than diesel. Retrofitting them to produce more diesel is hugely expensive and often not commercially viable.

The scenario is highlighted in a report - Readdressing the balance between petrol and diesel demand - for the RAC Foundation by Nick Vandervell.

The report points out that the number of diesel cars has soared in recent years, from 1.6 million in 1994 to 11 million in 2014.

The number of heavy goods vehicles has also risen: from 421,000 in 1994 to 474,000 in 2014 (this is below the pre-recession peak of 510,000 in 2007 but is rising again as the economy recovers).

Steve Gooding, director of the RAC Foundation, said:

“Ministers have just announced plans to curb air pollution with potentially significant implications for the millions of households who run a diesel vehicle. As this report illustrates, diesel-engined cars, van and lorries are deeply engrained in our society. The report also highlights another concern – the security of supply of diesel fuel.

“Today every other car bought is a diesel, but our refineries have struggled to keep pace with demand and have not attracted the investment they need to switch over from petrol production.

“Most of our refineries – some of which are more than half a century old - were built when diesel was a niche product. Retrofitting them 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.”

ENDS

Contact:

Philip Gomm – Head of External Communications – RAC Foundation

philip.gomm@racfoundation.org | 020 7747 3445 | 07711 776448 | 020 7389 0601 (ISDN)

Notes to editors:

 The RAC Foundation is a transport policy and research organisation that explores the economic, mobility, safety and environmental issues relating to roads and their users. The Foundation publishes independent and authoritative research with which it promotes informed debate and advocates policy in the interest of the responsible motorist. The RAC Foundation is a registered charity, number 1002705.

The report can be downloaded under embargo by following this link:

http://www.racfoundation.org/assets/rac_foundation/content/downloadables/Readdressing_the_balance_between_petrol_and_diesel_demand_Nick_Vandervell_September_2015.pdf

All the Foundation’s work can be found at www.racfoundation.org 

Nick Vandervell has worked in the oil industry since the early 1980s, both in the exploration side of the business, as well as ‘downstream’ refining and marketing. He has a keen interest in energy issues and the motor industry.

He was Communications Director of the UK Petroleum Industry Association, which represents the eight main oil refining and marketing companies, between 2004 and the end of 2013.

During that time he was responsible for developing and implementing a communications strategy that encompassed government and media relations, issues management and the writing of a wide range of articles and briefing papers, as well as co-authoring or authoring major publications including Meeting our energy needs – the Future of UK Oil Refining and Fuelling the UK’s future – the role of our refining and downstream oil industry.

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