After many months of anomaly, diesel is once again cheaper than gasoline, a change that is mainly explained by three reasons.
In the summer of 2022 we witnessed an anomaly that lasted until last February: a liter of diesel cost 95 more than gasoline when, historically, it has been the opposite. Now we have returned to the previous situation, diesel is once again cheaper than gasoline and there are three main reasons that explain this change.
It must be said that diesel has once again become cheaper than gasoline just when many voices warned that the opposite would happen. Between the end of January and the beginning of February, all the alarms went off, due to the entry into force on February 5 of a new package of sanctions against Russia, by the European Union.
These new sanctions had to do with the ban on all refined products of Russian oil, that is, derivative products, since the European Union stopped buying crude oil from Russia last year.
Given this, alarm bells went off and some voices in the sector predicted a rise in fuel prices, especially diesel, since it is the fuel that is most in demand in Europe.
However, the forecasts failed. Not only that, but also the price of fuel began to drop and diesel was even cheaper than gasoline again. It may seem crazy, but this turn of the page is explained by three reasons that we are going to discuss below.
Why is diesel cheaper than gasoline again? The sector has been preparing
As we have said, on February 5, the new sanctions against Russia came into force by which the European Union stopped buying refined Russian oil products. However, this did not catch the hydrocarbons sector off guard.
Although the sanctions entered into force on February 5, the European Union announced it last summer. Therefore, the sector has had time to prepare and, indeed, it has.
During all those months there was a greater collection of fuel reserves due to fears of a greater shortage in Europe. So now the reservations are full.
It hasn’t been a very cold winter
The second reason that explains the drop in the price of diesel is directly related to the previous point. Before the announcement of the sanctions against Russia, the sector accumulated large amounts of fuel to face the winter.
However, the (positive) surprise has been that this year there has not been a particularly cold winter in Europe, so the consumption of diesel for heating has been lower than expected and inventories are full.
Now, with the arrival of spring and the rise in temperatures, the demand for diesel to heat will gradually decrease.
The game of geopolitics
The third reason is the most complex and complements the previous two. We are living in a very important geopolitical moment, in which countries are juggling to continue placing their products on the market.
The price of oil depends a lot on the growth rate of the world economy and, as this growth is being lower than expected, the market right now is full of cheap crude oil from Russia, which is placed in other countries to later arrive to Europe.
Europe has stopped buying oil and its derivatives from Russia, but this does not mean that the oil that continues to arrive in the old continent is not, in part, Russian. The European veto forced Russia to look for other buyers, such as China and India, to whom it sells its crude oil at a more advantageous price.
That oil is refined in those countries and then sold to Europe, yes, with an extra cost, compared to the previous price, when it was bought directly from Russia. That is, European companies continue to receive fuel from Russian oil, but “subcontracted” through China or India.
The great beneficiary of this geopolitical game is the United States. It is the main producer of crude oil in the world, thanks to the exploitation of techniques such as fracking, and for a long time it has sold (and continues to do so) a lot of oil (and gas) to Europe at a very advantageous price for them.
The consequence of all this is that, with reserves full, oil producers can afford to lower the price of diesel. It is not that it is cheap, far from it, compared to previous years, but it is not as expensive as expected.
