Market Morsel: Fuel cheaper as we approach seeding.

The Snapshot

The seeding season is coming soon, and one of the largest costs will be fuel. Until reliable and large-scale equipment is built with a new fuel source, diesel will be used in agriculture for the foreseeable future.

There is some good news, and that is the fuel price. The current diesel price, on average around the country, is 167¢/litre. This is the lowest since December. It does seem strange to consider these prices ‘good’, as prices in the last decade averaged 127¢/litre. The second chart below shows the spread between crude and diesel, and in recent years, it has remained significantly higher than it was prior to 2022.

One of the major reasons for the fall in diesel prices is the fall in crude oil. The crude oil price has been under pressure recently as there are worries about the US and global economy. The tariff wars have caused uncertainty and expectations that demand will decline as global growth stalls.

One thing that is interesting is the amount of diesel on hand. Australia is supposed to hold 90 days of net imports of fuel under its international obligations through the International Energy Agency.

This is in place to stabilise oil markets during times of crisis, ensure adequate local stocks for emergencies, and keep the economy running.

The most recent data shows that the diesel on hand at 27 days, the highest level since records are available, although still sits significantly below the requirements.

We live in an increasingly uncertain period, and we never know what challenge is around the corner.