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Regulatory requirements seen keeping diesel prices high

(Photo courtesy BP p.l.c.)

CNS Canada — Diesel prices in North America aren’t likely to come down to the levels of gasoline anytime soon, according to an analyst.

“It’s probably going to trade at a premium to gasoline for some time,” said Phil Flynn, energy market analyst for Price Futures Group in Chicago.

One of the main challenges facing diesel manufacturers is the emissions requirements that have to be followed, he said.

By 2007, virtually all of the petroleum-based diesel fuel available in Europe and North America was mandated to be ultra-low sulphur diesel, a strain that required heavier processing and costlier oil while also reducing fuel economy by one or two per cent.

“When they started to switch to the ultra-low sulphur diesel the hope was that the refiners would get in front of it, prices would come down and it would only add a couple of pennies to the process,” said Flynn.

Unfortunately, that didn’t happen, said Flynn. The process has proven to be a much costlier affair and one where more things can go wrong, he said.

“The refiners at this time cannot produce enough of it to keep prices down because the process is a lot more expensive,” and that tightens up the supply, he said.

Ultimately, it may not be gasoline that pushes diesel down to cheaper levels, but natural gas, “because it will be a lot cheaper than diesel, and it’s cleaner burning.”

According to reports, diesel prices vary across the Prairies, with motorists in Calgary paying roughly 73 cents a litre for gas and 94-95 cents a litre for diesel.

In Winnipeg, drivers were reportedly paying around 83 cents a litre for gas and $1.03 a litre for diesel.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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