One thing most of us have noticed about diesel prices is that white diesel has held above petrol for the past few months, a reversal of the traditional relationship where diesel was the cheaper fuel.

According to data from the European Commission’s Weekly Oil Bulletin, diesel price before taxes in Ireland has risen 83% since a year ago, while petrol price before taxes is up 63%. On an EU weighted average, the rises are 79% and 52%, respectively, showing this is far from just an Irish issue.

The problem comes down to refinery capacity. And the lack of that is mostly driven by a mix of bad luck and bad timing. The push before – and during – the pandemic towards more environmentally friendly transport options meant many refiners, particularly in the US, decided not to make fresh investments in capacity. In the key Louisiana region, facilities which suffered hurricane damage were shuttered rather than repaired.

A build out of refining capacity would take years rather than months, and there seems to be little appetite in the US to make further investments. Globally, new refineries in the Middle East and Africa will not be online until the end of next year.

Latest prices in the US show diesel prices at the pump are running more than 30% higher than petrol. While such a spread might seem unthinkable here, it would not take much more going wrong to hit those levels.

One of the big problems for diesel is it is not only an automotive fuel, it is also heating oil and a good substitute for natural gas. The huge surge in the price of gas this year added to demand for diesel just as refining capacity fell.

There is some good news in the recent fall in natural gas prices, which will put less pressure on diesel as an alternative. However, coming into the winter, the next test for the market will be what the weather does. A cold winter could see anther leg higher in demand, which would see a fresh surge in prices.