“Diesel has long been the lifeblood of farming, powering tractors, trucks and other essential farming machinery,” says Azam Nikzad, market analyst/coordinating researcher with the Alberta government. “Marked diesel plays a crucial role in farming economics. Fuel purchases are one of the expense items for all farmers. In Alberta, machinery fuel expenses totaled approximately $1.06 billion in 2022, representing 6.3% of total farm operating expenses.”
Over the past decade, the price of diesel fuel has shown a consistent upward trend. The rate of increase has accelerated in the last 5 years, with an average annual increase of 8%. This acceleration surpassed the 5% of the past decade. The year 2022 marked the peak of this trend with the highest annual increase at 33.7%, closely followed by 33.3% in 2021. 2023 saw a reversal with 14.3% annual decrease in diesel prices. However, the prices increased in March 2024 by 5.9% compared to January 2024, but there was a slight decrease from February to March.
“Diesel fuel prices closely follow crude oil prices,” explains Nikzad. “Over the past decade, approximately 64% of the variation in diesel fuel can be explained by changes in Western Canadian Select (WCS) crude oil. Other factors that play a crucial role in influencing diesel prices are global supply and demand dynamics.”
Certain events have reduced diesel fuel supply and altered the market landscape. Russian sanctions interrupted established trade patterns and fostered market uncertainty, leading to higher prices. OPEC also curtailed its crude oil output. The U.S. policy encouraging lower-carbon alternatives is driving refineries to adapt by shifting operations towards renewable diesel production.