Following a pre-Budget rise of up to four pence per litre on widespread anticipation of an increase in duty, oversupply is currently keeping the price of red diesel fuel in a narrow range. However, with daily movements of up to one penny per litre, the market is currently described as being spiky. In the past two weeks, this has put typical deliveries of red diesel to farms at around 35-38 pence per litre.
In the run up to the speculation regarding the duty rise, red diesel prices had dipped to around 32 pence per litre and many in the industry were surprised that there was no subsequent rise in duty. Many in the industry expect to see a price in the low to mid 30’s delivered to farms in the UK over the upcoming few months.
South West based firm Mole Solutions’ business development manager, Nigel Collen, describes the current state of red diesel prices as having ‘two forces at work’, with oversupply keeping the prices down whilst traders try to notch them up.
For many, farm cash flow restrictions mean that despite many red diesel traders offering fixed prices right the way through to 2018, many orders of red diesel are only being placed once the fuel is needed. Speaking to farmers, Mr. Collen advised to keep oil tanks as full as possible, and said that in order to justify the premium to fix prices, the market will need to significantly increase.
However, many industry experts disagree, stating that recently, there was high demand for fixed price deals as more and more famers not only become more accustomed to this, but also value it more as it makes it easier to more predict accurate future costs. Rather than simply offering standard packages, many red diesel suppliers have been taking on more and more bespoke individual farm requirements such as flexible payment terms and more convenient deliveries. For example, one farmer had recently booked around ten thousand litres of red diesel to use over the upcoming six months.
In light of possible future price rises, now is the best time to order red diesel in bulk or opt for a fixed price term.
