Diesel Now Costs 38 Cents More Than Petrol and the Gap Is Growing

Pull up at the bowser next to someone filling the same size tank as yours. If your ute takes diesel and theirs takes unleaded, you'll walk inside owing about thirty dollars more. Same servo, same day, same 80 litres. That gap barely registered a decade ago. It's now the widest most Australian motorists have ever seen, and almost none of the reason for it is happening in Australia.

Start with the numbers. On 23 July the national average for diesel sat at 225.4 cents a litre. Regular unleaded averaged 186.8. That's a premium of 38.6 cents, and it's been widening. Earlier in the month the same market trackers had diesel running about 31 cents, or 16 per cent, above unleaded. Two fuels, two very different stories.

What the ACCC actually reported

The ACCC has been publishing weekly fuel updates all the way through the excise changes, and its twentieth report, released 24 July, contains the number that matters. In the three weeks to 22 July, the international price of refined diesel rose by about 34 Australian cents a litre. Over exactly the same period, the international price of refined petrol rose by about 10.

Same crude oil. Same shipping lanes. Same currency. More than triple the move.

The benchmarks have ugly names. Petrol is priced off something called Mogas 95, diesel off Gasoil 10 ppm, which is just trade shorthand for low sulphur diesel. Australia sets neither of them. We're a price taker on both, because we import the overwhelming majority of the refined fuel we burn. When those two benchmarks pull apart, our bowsers eventually copy them, with a lag of roughly two to six weeks while cargoes bought at the old price finish unloading.

The ACCC's twenty first update landed on 31 July and said more of the same: retail petrol and diesel up across capital cities and most regional locations, driven by the excise change and higher international refined prices off the back of conflict and disruption in the Middle East.

The world ran short of refineries, not oil

Here's the bit most of the coverage skips. The problem isn't crude. There's plenty of crude. The problem is the machinery that turns crude into diesel.

Global refining throughput in July ran as much as 6.5 million barrels a day below July last year. That's the lowest level of refining activity for this point in the calendar since 2020, when half the planet was locked down. Diesel exports specifically fell about 35 per cent, or 2.6 million barrels a day, according to Goldman Sachs, which now calls diesel the single biggest threat sitting in the oil market.

Three things stacked up at once. Russia halted diesel exports to deal with a domestic fuel crisis of its own, after Ukrainian drone strikes worked their way through its refining capacity. Middle East facilities went offline. Chinese refiners cut their run rates. Extra production out of the Americas and Africa has replaced only about a third of what went missing.

The result is refining margins that have gone vertical. In Europe, the premium of low sulphur gasoil futures over crude hit US$74.66 a barrel on 31 July, an all time record. In the United States, diesel margins peaked at US$93.44 a barrel in mid July while petrol margins topped out near US$60. To put that in perspective, a refiner clearing $20 a barrel used to be having a very good year.

Why Australia wears this harder than most

We import roughly 90 per cent of our refined fuel, and diesel is our single largest refined import. It arrives mostly from South Korea, Singapore, Japan, Taiwan and India, which means we're bidding for cargoes in precisely the market that's short. When an Asian refiner can sell a diesel cargo into Europe at record margins, Australian buyers either match that price or watch the ship turn left.

We've also got very little capacity of our own left to cushion the blow. Four Australian refineries shut in the decade to 2021, leaving Lytton in Brisbane and Geelong in Victoria, both propped up by government support. Geelong is currently running at more than 90 per cent of normal capacity, which counts as good news at the moment. Back in March the Prime Minister put national diesel stocks at 29 days. A $14.8 billion fuel security package announced in May is meant to lift onshore holdings toward 50 days across critical fuels, but that's a build, not a switch, and it does nothing for what you pay in August.

What it means at the bowser

The full excise came back at midnight on 2 August. Diesel drivers cop that on top of the international move, which is the genuinely unlucky part of the timing: about 16 cents plus GST, so up to 17.6 cents, landing on a fuel that was already climbing for reasons Canberra has no control over.

Then there's the thing about diesel that catches people out. Petrol runs in discount cycles in most capitals, which is why timing your fill matters so much for unleaded. Diesel doesn't really do cycles. It grinds. Waiting a few days for the best time to fill up works beautifully on unleaded petrol prices and does close to nothing for diesel.

Location does the heavy lifting instead. Diesel spreads inside a single suburb routinely run past 30 cents a litre, wider than petrol, because there's no cycle dragging the pack back together. In practice the servo two streets over is a better lever than the day of the week. Drivers in Perth, Melbourne and Darwin all see this, and regional freight towns like Toowoomba, Dubbo and Port Hedland see it worst, because a handful of sites service everything on the highway. Comparing diesel prices before you commit to a full tank is worth more this month than it has been in years.

And if you don't drive a diesel, don't relax. Diesel is 99.8 per cent of what rigid and articulated trucks burn, and mining alone gets through 9.6 billion litres a year, roughly 29 per cent of national consumption. Every pallet of groceries in New South Wales and Queensland moved on the stuff. Freight contracts reprice on a lag of a couple of months, which is when a diesel spike stops being a bowser story and becomes a checkout story.

The bigger picture

Worth remembering that diesel used to be the cheap option in this country. For much of the 1990s it sat at or below petrol on the board, the quiet discount for tradies and farmers, backed by an off road rebate scheme Australia has now run for more than four decades. Everything since has pushed the other way: a mining boom that runs on it, a freight fleet with no alternative, a European car fleet that dieselised and left the world structurally short of distillate, and the loss of most of our own refining.

None of the current squeeze is permanent. Refineries come back online, drone strikes stop, cargoes get redirected. But the structural gap between the two fuels isn't going anywhere, because petrol and diesel now answer to different masters. Petrol answers to your local price cycle. Diesel answers to a global industrial market you will never lay eyes on.

The practical upshot for your wallet: