Portland Pricing’s commercial bulk diesel index showed a significant fall of around 9ppl throughout April, declining from c.116ppl at the beginning of the month to c.107ppl by the end of April, its lowest price of the year at the time of writing.
The 7% decline of this price during the month is a result of weakened global energy demand caused by increasing concerns about a looming economic downturn, outweighing the prospect of global supply constraints with OPEC+ announcing output cuts.
Although GBP reached its highest point since June 2022, trading at $1.251 against the US dollar, levels of inflation remained above 10% with food prices increasing at the fastest rate seen in over 45 years.
The prospect of further interest rate hikes from the Federal Reserve and the Bank of England persisted during April and Chief Economist Huw Pill suggested that the central bank was unsure whether interest rates had been raised sufficiently to combat inflation.
Although economic growth in China looked promising, the nation’s manufacturing sector unexpectedly shrunk in April, stifling optimism over its growth and indicating an uncertain global economic outlook overall.
Following a significant drop in March, biofuels costs declined further in April, contributing to the drop in the price of commercial bulk diesel.
Compliance with the Renewable Transport Fuels Obligation, a legislative policy facilitating carbon reductions in the UK transport sector, is traditionally met by blending fossil product with renewable bioproduct. The process of blending biodiesel typically uses methyl ester bioproduct such as fatty acid methyl ester or rapeseed methyl ester.
The cost to blend to B7 specification (the UK standard specification of 7% biodiesel) declined to 3ppl by the end of April, continuing a trend of falling biofuels prices throughout 2023.
Renewable Transport Fuels Certificates (RTFC) prices have followed suit, declining by an additional 1p per certificate in April after a significant drop in March.
As a lower RTFC value reduces the benefit that renewable diesel (HVO) producers and importers (and therefore HVO consumers) receive, the price of HVO increased slightly across the month despite the decline in commercial bulk diesel. As a result, the differential between traditional and renewable diesel prices widened significantly, from 22ppl at the beginning of the month to 33ppl by the end of April.
Portland Pricing is a specialist provider of transparent, independent fuel price information, covering both traditional and alternative fuels. For more information, visit its website.
