Diesel vehicles have become increasingly popular and now account for over half of new car registrations in the UK.

This is in stark contrast to the situation 15 years ago, when petrol vehicles accounted for over 85% of new car registrations.

The popularity of diesel vehicles with motorists has continued to grow, not only in the UK, but in Europe as a whole.

In France, for example, diesel vehicles account for over 70% of all new vehicle registrations.

This trend has been driven by a number of factors, principally taxation policy in various forms such as lower duty and VAT rates in other EU countries; and in the UK, Vehicle Excise Duty, company-car tax and capital allowances for business users linked to CO2, but dramatic improvements in diesel engine technology have also played a part.

These have all incentivised low-CO2 vehicles and encouraged both private and fleet buyers and users to opt for diesel vehicles rather than petrol ones.

The main focus on CO2 reduction, with the introduction of mandatory CO2 targets for new cars, has also undoubtedly been a major driver of the switch to diesel cars.

This shift in demand has had some unintended consequences for air quality and for our refining industry.

With the demand for diesel having grown in the UK and Europe, as well as globally, we are now in a position where finished diesel fuel and some components to make diesel fuel have to be imported to meet demand.

There is a finite limit on the amount of diesel that can be refined from crude oil, no matter what the investment; hence, diesel demand has outstripped the ability of European refiners to meet it.

This has also had an impact on the pump price differential between petrol and diesel, particularly during the winter months when demand increases in Europe for heating gas oil, a product from the same part of the crude oil barrel as diesel.

Still, the UK petrol and diesel market is very competitive and normally delivers the cheapest pre-tax pump prices in Europe.

We have more information on our website (www.ukpia.com), including a dedicated page on the factors that influence forecourt pump prices.

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