Oil drops, but demand keeps diesel prices high

By: Chris Smith

The recent drop in oil prices will do little to offset diesel costs as refineries invest more resources to meet

The recent drop in oil prices will do little to offset diesel costs as refineries invest more resources to meet growing demand.

BP’s Shane Langford says diesel prices will continue to stay higher than unleaded because more consumers and companies are using it in favour of other fuels.

As a result, Langford says BP has had to invest more in upgrading its refineries and developing better extraction technologies to get as much diesel as possible out of crude oil.

"It has created an upward pressure on the diesel price," he says.

More pressure on diesel prices will come from developing countries, with BP estimating there will be greater demand for the product in the coming decades.

But while dismissing concerns about peak oil as "unfounded", Langford says demand may force refineries to use spare capacity, of which Saudi Arabia is the only country with significant amounts.

Langford says BP is investing heavily in alternative energy sources as greater attention turns to reduce carbon emissions and the impact this has on the environment.

"BP is focusing on second generation biofuels that won’t be a substitute for food or destroy rainforests," Langford says.

He says BP is wary of substandard biofuel products and will ensure any blend it produces meets vehicle manufacturers ‘ requirements.

"We wouldn’t sell a biofuel blend unless we were confident it wouldn’t damage the machinery," Langford says.

The price of oil has fallen from record highs of almost $US150 a barrel to less than $US50, sparking a dramatic drop in fuel prices.

Howver, the Orgnisation for Petroleum Exporting Countries (OPEC) wants to push the crude oil price back up to $US75 a barrel, claiming it represents a fair price.

OPEC will next meet on December 17 to decide whether to cut production. Venezuela wants the organisation to reduce its output by at least 1 million barrels a day before the end of the year.

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