Red diesel prices stabilise after recent panic-buying frenzy

Fuel prices look set to stabilise and begin to drop as the after-effects of a difficult September start to diminish. 

The national average red diesel price was at 73.6p/litre on Wednesday 27 October, down slightly from 74.3p/litre the previous week.

This is based on a Farmers Weekly midweek survey of four suppliers across the UK for a 5,000-litre delivery within 20 miles of the depot on 28-day payment terms.

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It remains a huge jump on the same time last year, when the average was reported to be just 41.9/litre, with crude oil prices depressed as a result of low demand during Covid-19 restrictions.

Oxfordshire buying group the Orion Farming Group said its fuel supplier price for average volumes at standard delivery times was at 74.52p/litre on Tuesday 26 October.

Adam Donaldson, director of Demand Economics, which runs the group’s fuel commodity business, said the current red diesel price was up 33% on June, due to recent panic-buying.

However, prices have now stabilised, dropping marginally on the week. This is due to demand tapering as the drilling season draws to a close and supply chains starting to recover.

“With many farms getting caught up in the forward-stocking frenzy of late September, orders in the week beginning 18 October were just one-quarter of the volume of the record week beginning 27 September,” Mr Donaldson said.

“Interestingly, it is the smaller owner-managed fuel suppliers – with shorter supply chains and demonstrating more innovation than the larger national fuel suppliers – that are finding ways to get fuel to farm quickly.”

Lead times have reduced from 15 working days just two weeks ago to about seven, though there is still some way to go to reach the “acceptable” maximum of three to four working days.

Values likely to drop

It is likely prices will continue to gradually fall over the next few weeks, as more supply comes on stream and demand falls away, said Mr Donaldson.

However, global oil prices continue to have a strong, albeit delayed, effect on the fuel market. With crude oil one-month futures having risen rapidly over the past month to a level not seen since October 2014, it would not be wise to assume fuel prices faced by farms will drop down to June levels any time soon, he advised.

While the traditional period for suppliers offering to forward-fix red diesel prices has passed, the recent volatility could make suppliers more cautious going into next year, and result in offers containing additional risk premiums than in the past, Mr Donaldson said.

Neil Cooper, customer executive at online input pricing and booking platform Yagro, said: “The unlocking of all areas of life post Covid has seen a huge increase in fuel demand. This has been exacerbated by the rising cost of gas, meaning some industries have switched energy supply from gas to liquid fuel, furthering the supply/demand challenge.

“A shortage of lorry drivers has stressed the situation further for the past few weeks, but we are now seeing a more normal situation evolve.

“Prices, however, remain very high compared with last year, and compared with many farms’ budgets, meaning constant revisions of budgets are likely.”