Red Diesel Price UK Explained

Red diesel, a distinctive fuel dyed red, plays an important role in multiple sectors across the United Kingdom. The specialised fuel is primarily used in off-road vehicles and machinery, such as agricultural equipment, construction machinery, and heating systems.

Understanding the prices of red diesel in the UK is essential for those who rely on it for their daily operations.

In this blog, we will explore the factors influencing the cost of red diesel, its tax implications, and the recent fuel developments in the UK market.

Exploring Red Diesel

Before we explore the difficulties of red diesel pricing, it is that we understand what red diesel is and its purpose.

Red diesel, also known as gas oil, is virtually identical to regular diesel with the only key difference being that the fuel is dyed red. The purpose of this is to distinguish it from regular diesel and to identify the fuel when being used illegally in on-road vehicles.

Red diesel is used in a wide range of sectors, including agriculture, construction, forestry, and shipping. Its primary advantage is its lower cost, thanks to reduced fuel duty and value-added tax.

However, the fuel can only be legally used in off-road vehicles and machinery, as using it in a road-going vehicle is a criminal offence in the UK.

Factors Influencing Red Diesel Prices

There are several factors that influence the price of red diesel in the UK, as they do for regular diesel. Here are some of the key factors:

Crude Oil Prices

The primary factor of the fluctuation in red diesel prices is crude oil. Crude oil is a vital part of the process of producing red diesel. Red diesel is derived from the raw product of crude oil meaning that if there’s a fluctuation in the price of crude oil, red diesel will typically follow and its prices will tend to fluctuate.

Exchange Rates

As a considerable portion of the UK’s crude oil is imported, exchange rates play a crucial role in determining fuel costs. A weaker currency can lead to higher red diesel prices as importing oil becomes more expensive.

Seasonal Demand

Seasonal variations in demand, particularly in agriculture and heating sectors, can influence red diesel prices. Prices may rise during peak demand seasons and fall during off-peak periods.

Particularly during winter months, we may see a rise in diesel prices due to a high demand for red diesel by industries and businesses to be used as a form of heating.

Tax Implications of Red Diesel

One of the main reasons why red diesel is highly favourable in the UK is due to its tax treatment. However, it is essential to be aware of the tax implications that are associated with red diesel. Here are some below:

Fuel Duty

Red diesel benefits from a reduced rate of fuel duty compared to white diesel, rendering it more cost-effective for off-road applications.

The UK government has applied a lower duty rate on red diesel in order to aim to support sectors like agriculture, construction, and manufacturing, fostering economic growth and ensuring the affordability of crucial services and goods.

Value Added Tax

Although red diesel is subject to VAT, it is charged at a reduced rate, making it more affordable. Some sectors, such as agriculture, can often reclaim the VAT they pay on red diesel.

When VAT is imposed on red diesel, it adds an additional cost to the price of the fuel. This increased cost is typically passed on to consumers, including businesses that rely on red diesel for their off-road machinery and vehicles.

Legal Restrictions

Legal restrictions can significantly impact the price of red diesel. The lower price associated with red diesel is contingent on its specific usage for off-road vehicles and machinery.

Legal restrictions, such as strict enforcement measures and penalties for its unauthorised use on public roads, are put in place to ensure that red diesel is not misused. These regulations create a distinct market for red diesel, with limited eligibility for reduced taxation.

Recent developments in the UK Red Diesel Market

The UK government regularly reviews and revises regulations governing red diesel use and taxation. Here are some of the most recent developments:

April 2022 Changes

In April 2022, significant changes were made by the UK government regarding the usage of red diesel. Tax relief was removed from red diesel for many industries, meaning that a ban was being put in place for many current users of red diesel.

While the lower fuel duty rate and reduced VAT rate for red diesel remained, certain sectors, including horticulture and aquaculture, lost their ability to reclaim VAT on red diesel.

Climate Change

The UK government has increased its efforts to address climate change and environmental sustainability. As part of this initiative, discussions have risen regarding the phased reduction of red diesel use in specific sectors to reduce emissions.

Alternative Fuels

In response to environmental concerns, some industries are exploring alternative fuels and technologies to decrease their reliance on red diesel and minimise their carbon footprint. These initiatives include adopting cleaner fuels and more energy-efficient machinery.

Red Diesel At Pleavin Petroleum

If you are looking to purchase red diesel for your business, Pleavin Petroleum provides a guaranteed same-day fuel delivery service once you place an order. The team here at Pleavin Petroleum provides expert delivery services to ensure your business can continue to run smoothly and efficiently.

To find out more about red diesel and delivery services, visit our product and service pages or contact a member of the team who is here to help.