Red diesel prices fall to lowest level in three years

Red diesel prices have fallen to the lowest point since September 2021, according to weekly figures collected by Farmers Weekly.

Prices have dropped by 16% since the start of the year and stood at 63p/litre in September, based on a 5,000 litre delivery.

Neil Cooper, marketplace manager at Yagro, said: “Farm fuel prices have seen a significant drop over the past year, offering both challenges and opportunities for UK farmers.

See also: UK grain markets near £180/t and forecast to stay firm

“Currently, on-farm delivered prices for ‘EN590’ red diesel are sitting around 63p/litre delivered on farm, a notable drop from 87p/litre just 12 months ago.”

He added that price declines would provide some relief for farms and delivery times were as normal with good supply and availability of product.

Mr Cooper advised farmers to keep a close eye on prices to avoid future risks.

“With drilling under way across the country, farms should be aware of their fuel requirements for the next few months; buy at a price you know, rather than an unknown future cost particularly with rising Israeli-Hamas tensions, which could impact on global oil prices,” he said.

Louisa Beasley of Worcestershire-based fuel supplier Callow Oils said prices were the best they had been all year and they had seen prices fall by 12p/litre since the start of 2024.

She said that global markets remained “jittery” due to tensions in the Middle East, while hurricane season in the gulf of Mexico was also having an impact on the market.

At a UK level, a shortage of kerosene in the Midlands was causing some localised supply constraints.

Ms Beasley added that fuel orders from farmers had been fairly consistent, but they had noticed an increased early uptake in domestic orders to fill tanks for winter heating.

Global oil markets

Organisation of the Petroleum Exporting Countries (Opec) has projected global oil demand at about 2m barrels a day, which is lower than previous estimates but still above pre-pandemic levels.

Meanwhile, Opec has forecast world oil supplies to be up on the year.

A report by the International Energy Agency suggests there were concerns of an oversupplied global market with less demand from China and economic headwinds, which had contributed towards falling oil prices.

Brent crude oil was trading at about $75 (£56) a barrel on 24 September, after falling to a low of $72 (£53.80) on 10 September.

Traders at Yagro said global oil prices had started to rise slightly in the short term due to geopolitical tensions in the Middle East and hurricanes causing supply disruptions in the US.

However, they suggested that in the longer term fuel prices may face pressure in both directions.

Exchange rates

A stronger pound against the US dollar in recent months was making fuel more affordable in the UK, with the exchange rate at £1 to $1.34 on 25 September.

Mr Cooper said: “Exchange rates play a crucial role in shaping on-farm fuel costs. Oil is traded in US dollars, and fluctuations in the value of the pound against the dollar has a significant impact as it does with the grain market.”

Road fuel

Fuel prices have also dropped back, with unleaded petrol averaging 135.5p/litre on 25 September, according to motoring firm RAC, while diesel averaged 140p/litre.

Industry forecasts by the RAC indicate that fuel prices should fall even further.

However, potential changes in the government budget could have an impact.

The AA (Automobile Association) has called for fuel duty to be frozen again in the Budget and has warned that those in rural areas would be some of the most affected by any increase in fuel duty.

Ms Beasley noted that fuel duty had been frozen for several years and said she was not as confident that it would be frozen again by government this autumn.

There are also concerns within industry about the potential introduction of a pay-per-mile scheme, which could add to costs for businesses.

The Competition and Markets Authority (CMA) is continuing to investigate uncompetitive fuel markets in the UK, with fuel margins still high.

CMA chief executive Sarah Cardell said drivers were still paying too much for fuel.