Putting a price watch on diesel

One of the first tasks confronting the new federal petrol commissioner, Pat Walker - who began work yesterday - is to examine the spiralling price of diesel fuel. Diesel has jumped from $1.46 on February 17 to nearly $1.60.

While it is an efficient and miserly petrol alternative, its value to motorists has been eroded by the price differential of more than 10c a litre compared with petrol.

Yet diesel is cheaper to produce and there is superficially far less demand, at least among Australian drivers.

What Mr Walker should establish, and quickly, is whether the causes of the rise in diesel prices are justified.

Have petrol companies pushed up the price of diesel because, in effect, it is under the radar? Has the public and political focus on petrol prices allowed the incremental increase in diesel to go almost unchallenged?

As always in the case of motor-fuel prices, there is no easy answer.

Diesel prices have been pushed up because of the traditional winter fuel price demand of the northern hemisphere, which is now abating.

Emission standards, particularly in Europe, have demanded a greater reduction in sulphur from diesel, which impacts on costs.

Also, the shutdown of refineries in the Gulf of Mexico, diversion of mass refining from diesel to petrol, the growing popularity of diesel vehicles (both domestic and industrial) in Europe and Asia and increasing industrial demand from China and other emerging industrial nations have all played a role.

But are they genuine reasons for the rapid rise in diesel prices - and the negative differential with petrol - or are they excuses grasped by petroleum companies to exploit an emerging sector of the motoring market?

That is something Mr Walker should put high on his agenda.