Comment – Do not suspend reality just yet

It’s that time of the year when thoughts turn to Autumn, as the fields are awash with mushrooms (for once) and the hedges are heavy with sloes. The Met Office reckons that it will be slightly warmer and wetter than usual but wont be drawn on the cold winter (or otherwise).

Also given this weekends news about the Houthi’s and the Bab al-Mandab strait and the associated actions strangling oil movements, I was curious about the future cost of diesel going into winter. I asked an online AI platform for a prediction at Christmas. With red diesel being £1.10/l delivered this week, I received this answer:

Red diesel could reach 130p/l by Christmas

UK agricultural machinery businesses should budget for further increases in red diesel prices through the autumn, with agricultural gas oil potentially reaching around 125–135p/litre by Christmas.

The current market is being driven less by crude oil prices alone and more by tight diesel supplies and refining capacity. Brent crude has moved above $100/barrel, while disruption affecting Russian and Middle Eastern refining capacity has tightened the supply of middle distillates, including diesel.

For farmers and contractors, higher fuel costs will put further pressure on machinery operating costs and margins at a time when many businesses are already facing cautious investment decisions.

A return to more normal oil and fuel markets could see red diesel fall back towards 95–110p/l, but a prolonged supply disruption could push prices towards 140–165p/l or higher. For machinery manufacturers, importers and dealers, the latter scenario would increase the importance of fuel efficiency, reduced operating costs and productivity when selling new equipment.

The UK agricultural red diesel duty rate is currently 6.48p/litre following a temporary 3.7p/l reduction. Unless extended, that reduction is due to end on 31 December, potentially adding a further 3.7p/l from January 2027.

For supply-chain businesses preparing budgets and forecasts, 130p/l is a sensible working assumption for red diesel by Christmas, with 150p/l worth using as a stress-test figure.

The bigger issue may be diesel rather than crude oil itself. Even if oil prices moderate, tight refining capacity could keep diesel prices elevated, making fuel consumption and machinery productivity increasingly important factors in purchasing decisions.

It starts to make electric powered machines look a little more attractive. Or at least the idea of filling the tanks now, if you can.

Back at home the rain gauge for August showed a respectable 99mm total, down from an all time high of 272mm in 2020, but not the lowest on record at 79mm in 2021.

I’m off to Royston in the morning for Tillage-Live set up, maybe see you in a field?

Have a good week.

Andy