Downstream oil in brief: Europe’s taxing love affair with diesel

The price advantage diesel has enjoyed over gasoline for many years in Europe is being steadily eroded. The price differential between these grades has progressively narrowed , reaching a ten-year low in early 2019. Much of this change is being driven by governments across Europe who are progressively increasing the duty on diesel relative to gasoline. Additionally, we expect the IMO bunker fuel specification change in 2020 to exacerbate the situation as it poses an upside risk to diesel pump prices in the coming months. In addition to the government led more away from diesel, there has also been a major shift in consumer preference. Growing concerns around particulate emissions from diesel engines, fuelled by the 'dieselgate' car emissions fraud scandal, have seen diesel car sales in Europe plummet. As such, gasoline and alternatively powered vehicles are filling the gap and gaining popularity.