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Farmers feel the pain of rising diesel prices

Farmers are among the heavy users of diesel feeling the pinch of rising fuel prices following Russia’s invasion of Ukraine.

The days of 2016 when 91-octane gasoline was $2 a liter and diesel about half are long gone and 30 cents a liter now separates prices at the pump.

Last week, fuel app Gaspy had unleaded 91 prices averaging $2.94/l across the country and diesel at $2.65/l.

Some respite has come from the government’s temporary transport relief scheme, introduced on March 14 and extended a few weeks ago.

The petrol tax cut of 25c a liter will continue until mid-August and the 36% cut in diesel road charges until September.

AA’s top policy adviser, Terry Collins, said the narrowing of the gap between petrol and diesel prices was partly due to government petrol tax cuts.

The rest of the difference was due to the fact that diesel had become much more expensive around the world, as the oil-producing countries were not producing enough and this was unlikely to calm down anytime soon.

“Shanghai has just started to come back [after a long Covid-19 lockdown] and the whole supply chain has been blocked, which will release trucks and parts. This will mean more demand and prices will rise.”

Mr Collins said motorists should expect existing petrol and diesel prices to remain at $3 a liter for the next few years.

He said the fuel situation was fueled by the conflict in Ukraine and diesel was expensive to supply.

“There’s actually a global shortage of diesel and that’s having a big impact in Europe, and air travel is picking up.

“Kerosene and diesel are made from the same type of oil or middle distillate and basically Jet A-1 is very close to kerosene, which has an effect.

“It’s also exacerbated because the United States has just entered driving season as it transitions from winter to summer and has started putting more fuel on cars.”

Russia is the third-largest oil exporter, but the Kremlin is under sanctions for invading Ukraine, and Saudi Arabia and the United Arab Emirates have agreed to only modest increases.

The United States is a major producer and importer, while Venezuela has the largest oil reserves but also has sanctions against it.

Mr Collins said New Zealand and other countries were feeling the effects of the US offside with some of the oil nations.

He said the resulting increase in inflation and pressure would only be made worse by the government’s commitment to climate change to increase energy’s contribution to emissions.

Federated Farmers Mid Canterbury chairman David Acland said high diesel prices were having a direct impact on farms and rising along with other farming costs.

He said this affects all facets of agriculture, as transportation is a major cost.

“It’s bounced back and it’s a significant issue throughout the supply chain. Energy in the fuels business is a priority right now.”

Prices also rose for the main agricultural inputs of fertilizers, labour, interest rates, agrochemicals, contracts and machinery. Superphosphate prices rose more than 30% in a single day last week.

Mr Acland said farmers were fortunately getting “brilliant” yields to absorb some of the impact of agricultural inflation.

The Mt Somers Station farmer is the federation’s new provincial president following the resignation of longtime David Clark in mid-May.

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