WHY do they call it crude oil?
Because of the crude words you say when you see the fuel price.
When we look at the top costs for farmers, diesel is near the top of the list.
It's getting expensive, so let's have a look at it.
Crude oil is the main driver of diesel prices.
The correlation is strong, when the market for crude oil increases, the cost of diesel increases.
This does make sense, after all diesel is made from crude oil.
The cost of crude oil has risen dramatically during the past year, off the back of increased demand but also as an impact of the war in Ukraine.
In Chart 1, in Australian dollar terms, crude and diesel are at the highest levels since at least 2004.
The diesel spread is shown in Chart 2.
This shows the difference in price between crude oil and diesel.
The glaring point of this is that the cost of diesel in Australia is trading about record premiums over crude oil during the past year.
Generally, crude oil is a lot more volatile than diesel.
Over time, there is about a week lag between the change in price in crude and diesel.
The crude oil price has come under pressure in recent times as there are concerns about an economic slowdown and the potential for demand destruction.
If we see this eventuate, then we will likely (hopefully) see falls in diesel pricing.
READ MORE:
