(The online newspaper): According to Statistics Norway, the passenger car fleet in Norway in 2021 consisted of as many as 1.2 million diesel cars, against nearly 900,000 petrol cars and 460,000 electric cars.
For almost a year we have had to get used to the fact that diesel below NOK 20 is “cheap”, and at the time of writing the price fluctuates between around NOK 21 and NOK 24, while the price of petrol now regularly drops below below 20 NOK .
There are few bright spots in store for the country’s diesel car owners.
Gasoline prices have now stabilized below diesel prices, mainly due to the fact that oil prices have come off their highs and are down towards $90 a barrel. according to the latest market report from the International Energy Agency (IEA) however, there is little cause for optimism for diesel pumps in the coming months.
New record prices in October
Diesel prices and “crack” (the difference between the price of crude oil and the price of refined products) soared to new record highs in October, and are now 70 and 425 percent higher respectively than in the same period last month. last year, says the IEA in the report. At the same time, the price of North Sea (Brent) oil has only increased by 11% over the same period.
The reasons for this are complex:
- Spirit warehouses are emptier than in many decades
- French refinery strikes in October and the impact of the boycott hit diesel prices hard in Rotterdam, which is Europe’s main trading center for diesel
- Diesel prices have also risen sharply in the United States in anticipation of the winter season in the northeast of the country
The effect is triple negative: extreme diesel prices drive inflation and create greater pressure on the world economy and on oil demand. The IEA believes oil demand growth will decline from 2.1 million bpd this year to 1.6 million bpd in 2023.
Lower capacity
In the case of diesel, demand growth falls much further: from 1.5 million b/d in 2021 to 400,000 b/d in 2022. Further pressure from high prices and a weaker economy will trigger diesel growth. even weaker demand in 2023, estimates the IEA.
Even before the war in Ukraine, the diesel market was characterized by a significantly smaller refining capacity. In recent months, capacity has been added which partially replaces Russian refineries, but production capacity is still lower than a year ago, which drives up prices.
But what really lurks behind the mirror is the net effect of the Russian oil boycott: Much of the significant refining capacity that supplies the West has been Russian.
Now comes the boycott effect
The full impact will come in December and February respectively, according to IEA estimates:
In October, EU countries’ imports of Russian oil were cut by 1.1 million barrels per day (mb/d) to 1.4 million barrels per day. Diesel dropped 50,000 bpd to 560,000 bpd.
When boycotts of crude oil and petroleum products are fully implemented in December and February respectively, another 1.1 million barrels of crude oil per day and one million barrels of diesel, naphtha and fuel oil will need to be replaced.
There will be a battle for resources, believes the IEA, writing:
“Competition from non-Russian diesel barrels is becoming intense. EU countries have to compete with traditional diesel buyers from the US, the Middle East and India.”
Better capacity will eventually improve market balance, but in the meantime diesel prices can get so high that demand will simply drop permanently and sharply as a result – this is what analysts often call “demand destruction”.
In other words, diesel prices are likely to be higher than today throughout the winter.
