Diesel prices are set to remain under pressure until spring in the northern hemisphere as the transport industry finds itself having to join the queue for fuel, along with energy producers and households.According to research conducted by the 38-member Organisation for Economic Co-operation and Development (OECD), road transport accounts for 48.6% of demand for oil. In addition, one of the fallouts arising from Russia’s invasion of Ukraine is that global power producers are switching from gas to what is essentially diesel. This means there is little prospect of a significant reduction in diesel prices over the short term.Platts Analytics predicts that global oil demand from gas-to-oil switching could jump by more than 80% over the next six months. This, after soaring prices for natural gas and liquefied natural gas (LNG) push more power producers, refiners and industrial users to burn fuel oil and other liquid fuels.The International Energy Agency supports this view, warning that “with supply increasingly at risk to disruptions, another price rally cannot be excluded”. In its latest forecast, the US Energy Information Administration (EIA) puts the Brent crude oil spot price at an average of $98 per barrel in the fourth quarter of 2022 and at $97 per barrel in 2023. “The possibility of petroleum supply disruptions and slower-than-expected crude oil production growth continues to create the potential for higher oil prices,” said the EIA. “We forecast that global consumption will rise by an average of 2.1 million barrels per day (b/d) for all of 2022 and by an average of 2.0 million b/d in 2023. “As a result of high natural gas prices globally, we increased our forecast for oil consumption in the fourth quarter of 2022 and the first quarter of 2023 as electricity providers, particularly in Europe, may switch to oil-based generating f uels.”However, the EIA added, “the possibility of slower-than-forecast economic growth creates the potential for lower pr ices”.In South Africa, Eskom is putting pressure on diesel supplies. In March, it was burning nine million litres of diesel a day in order to keep the lights on during Stage 4 blackouts, chief operating officer Jan Oberholzer told the media. This excludes the millions of litres being burned by generators at factories, office blocks and shopping malls in what is effectively a shadow grid.In June, South Africa’s largest real estate investment trust, Growthpoint Properties, reported that it was running short of diesel to keep tenants in business during blackouts. Further pressure is being put on South African diesel supplies by the shutting down of refineries and the switch to cleaner fuels.Energy consultancy Citac has warned that there is insufficient infrastructure at the ports and storage facilities to handle an expected trebling of petroleum imports. South Africa currently imports about 60% of its refined fuels; this is expected to increase if the government enforces regulations to limit diesel fuel to 10 parts per million (ppm) from 50ppm, as planned in September 2023.In July, it was announced in the Government Gazette that this had been deferred to 2027 – a decade after the initial target date of July 2017.
