Recession keeps diesel lower, but OPEC wants hikes

Global recession likely to keep diesel prices down, expert says, but prices will "skyrocket" again

By Michael House

The global recession is likely to keep diesel prices down for the time being, but expect fuel at the pumps to get more expensive as the recession begins to ease.

That is the message from FUELtrac Director John Cowell, who says as long as demand stays down so too will the cost of diesel.

"Diesel is an industry fuel all across the world with the exception of Europe," Cowell says. "Until demand increases [diesel’s] cost will stay down.

"When the price will skyrocket again depends on your view on what is going to happen in the world economy in the coming years, especially in China and India. If the world economy picks up so does the cost of diesel."

Cowell’s comments come in the light of an announcement by OPEC that the organisation wants to see the price of oil increase to at least $70 a barrel in order to cover future production costs.

OPEC Secretary General Abdalla El- Badri says the current price is simply not enough to continue such things as exploration and drilling in new parts of the world in order to find new sources.

"The price of $50 is not enough to cover investment costs for the future," El-Badri says.

"The price which allows reasonable and acceptable revenues is more than $70 a barrel."

Cowell says this statement is justified but worries about Australia’s decreased self-sustainability when it comes to the fuel which powers its road transport network.

"Oil fields have a cost of production, if you are going to go exploring for other oil fields you need more money to do this," Cowell says.

"Australia is importing nearly 30 percent of its diesel, we are becoming less and less self-sufficient.

"We have natural gas available and if someone could come up with an effective solution in ten years time this would bring down our reliance on diesel.

"You would think this would happen in ten years time."

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