December 1, 2022

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Gasoline and fuel prices |  New jumps in pumping prices: here is the explanation

Gasoline and fuel prices | New jumps in pumping prices: here is the explanation

(Nettavisen.noLast week, pump prices once again made a new leap to the top and are approaching their peak levels from a few months ago. Nettavisen has recorded diesel prices as high as NOK 27, and gasoline prices are somewhat lower than this.

In addition, there is an almost standard difference between fuel, and unlike what we are used to before, diesel is the most expensive.

– The price of diesel is higher than the price of petrol now because the purchase price of pre-refined diesel has increased more than the price of pre-refined petrol. But both have increased significantly since the end of September, after a longer period of lower purchase prices, says Knut Hjalmar Hansen, director of communications at Circle K Norway.

He asserts that since the end of September, the price of gasoline here at home has increased by 1.40 NOK, and the price of diesel has doubled.

It appears at the pumps after adjusting prices, and before price wars drive prices down, says Hansen.

French strike and totals

It is normal for pump prices to change during the week. Economics professor Austin Voros previously told Nettavisen that gas stations are “unlikely to incur a loss” when they hit their bottom, before prices rise again..

There is a lot of volatility, and not all global markets are to blame, says Helge Andrei Martinsen, oil and gas analyst at DNB Markets.

But the fact that diesel is now much more expensive than gasoline has international explanations, Martinsen asserts, highlighting several reasons for this:

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– We have the situation around Russia, which is an important exporter of diesel-like oil products. In addition, there is an ongoing strike by refiners in France, which is putting pressure on the markets. Stocks of distillates used in the diesel industry are now at very low levels.

The strike hit six out of seven French refineries hard, according to the French news agency, which reports fuel shortages and the situation has worsened after motorists are hoarded.

Gas prices, which are now three times the price of oil, also ensure that in many places it will be profitable to use diesel generators instead of getting power from gas, as this is an alternative, Martinsen says.

Thus, the demand for diesel is also rising as an indirect effect of higher gas prices.

Biden, Saudi Arabia and oil

About a week ago, the OPEC + countries, a group of oil-producing countries that includes Saudi Arabia and Russia, decided that they would cut oil production by two million barrels per day.

The decision sparked outrage in Washington, DC, and a simmering conflict between the Biden administration and Saudi Arabia, which is usually a fairly stable ally of the United States in the Middle East. The mounting pressure on pump prices in the US may be enough for Democrats to lose congressional by-elections at the beginning of November.

In addition, the conflict creates new pressure on prices in the oil market, and therefore also contributes to raising pump prices in this country:

The conflict with OPEC + contributes to raising oil prices, but it is not very important for the difference between diesel and oil, as Martinsen explains.

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Expectations of a cut from OPEC+ pushed the price of oil to rise from $84 to $94. The oil analyst explains the effect as follows:

The general rule is that the price of gasoline rises by 70 or a liter when the price of oil increases by $10.

– It will happen again

In other words, gas prices, the Russian war and production cuts are affecting pump prices. But we will encounter a situation of fluctuation and large local differences no matter where the top and bottom of the market:

– It’s true that both petrol and diesel have had less than NOK 20 at the pump in many places, and about NOK 22 recently, says Knut Helmar Hansen in Circle K.

He asserts that price wars occur in local markets with strong competition.

– It is not the first time that diesel is more expensive than gasoline. It has happened before, and it will happen again. It must be remembered that these are two different products that are produced differently in refineries.