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I used to think I knew it all about fuel prices and what affected them. If the spread between unleaded and diesel was very small (and/or if diesel was cheaper), the main problem is gasoline refining capacity. If diesel is substantially more expensive than unleaded, the main problem is crude oil prices.
At least that's what explained everything for years, until this recent run-down in prices. Now I have seen stations where the spread between diesel and unleaded is an unprecedented $1.60 per gallon, with diesel standing at almost twice the price of gasoline. This all when oil is trading below $45! They talk about how oil is at its lowest price since early 2009. I know that fuel prices tend to lag oil prices, but in early 2009 I had a diesel truck. I recall diesel getting down as low as $1.89 per gallon. It seems, then, that it need not be $3.29 per gallon when oil is maybe only 33% higher than it was in early 2009. Gasoline prices seem to be commensurately pacing the run-down in oil prices but diesel prices are not.
A combo of 'reasons', off the top of my head:
-many states have a higher per gallon tax on diesel vs gasoline
-low sulphur diesel regs in the US require add'l refining steps
-on avg, a bbl of oil is yielding 19 gals of gas vs 12 gal of diesel
-less demand for diesel vs gasoline, at the pumps
-home heating oil, (basically diesel), is in demand all winter
-diesel is a worldwide commodity in ever increasing demand; gasoline less so.
-'marginizing' the product, as the refiners know that besides the much smaller popl of diesels vs cars/small trucks, the big trucks need and the mkt has thus far borne it.
My 50Cts...
GL, mD
Last edited by motordavid; 01-14-2015 at 04:56 AM..
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Quote:
Originally Posted by motordavid
A combo of 'reasons', off the top of my head:
-many states have a higher per gallon tax on diesel vs gasoline
-low sulphur diesel regs in the US require add'l refining steps
-on avg, a bbl of oil is yielding 19 gals of gas vs 12 gal of diesel
-less demand for diesel vs gasoline, at the pumps
-home heating oil, (basically diesel), is in demand all winter
-diesel is a worldwide commodity in ever increasing demand; gasoline less so.
-'marginizing' the product, as the refiners know that besides the much smaller popl of diesels vs cars/small trucks, the big trucks need and the mkt has thus far borne it.
My 50Cts...
GL, mD
This is the biggest reason, and why the diesel price gets much closer to gas in summer when thre is no demand for home heating oil.
This is the biggest reason, and why the diesel price gets much closer to gas in summer when thre is no demand for home heating oil.
The demand for diesel is always in demand, in Europe most cars and lt trucks are diesel. All trains use diesel, as well as ships, and everyone's navy except the nuclear powerd ships and subs. Every trucking company uses diesel. And most of your industeral back up generator's also. So you see why diesel is not cheaper than gas. Also most truckers never shut their engines off in the winter in the colder climates. And diesel dose not go up because of no demand for heating oil in the summer. It's supply and demand and diesel is always in demand around the world.
The demand for diesel is always in demand, in Europe most cars and lt trucks are diesel. All trains use diesel, as well as ships, and everyone's navy except the nuclear powerd ships and subs. Every trucking company uses diesel. And most of your industeral back up generator's also. So you see why diesel is not cheaper than gas. Also most truckers never shut their engines off in the winter in the colder climates. And diesel dose not go up because of no demand for heating oil in the summer. It's supply and demand and diesel is always in demand around the world.
All trains are diesel? No they are not. Most freight trains in the US have diesel locomotives. Most high speed rail systems around the world are electric. The Amtrak Acela train is electric. Almost every "metro" system, whether above ground or subway, is electric.
All trains are diesel? No they are not. Most freight trains in the US have diesel locomotives. Most high speed rail systems around the world are electric. The Amtrak Acela train is electric. Almost every "metro" system, whether above ground or subway, is electric.
Sorry I ment freight only like Norfolk and southern, and the CN. I know high speed rail and subway trains are electric. Don't have a stroke ok why do pencils have erasers because everyone makes mistakes.
It's expensive because we don't have the govt support and demand to improve the logistics of delivering the fuel.
Not many gas stations carry it so they have to charge more to hold the fuel in order to make a profit. For petro they go with volume so prices are lower.
I'd believe all of this without question, except for the following truths:
1) Diesel was historically cheaper than gas. I recall it always being cheaper than gas in the late 1990's when I started driving, and many other people have backed up this assertion.
2) When diesel was cheaper than gas, all trucks and most trains and buses still used diesel. Furthermore, their fuel economy was worse than it is now, so demand was surely still quite high.
3) Diesel cars have always been popular in Europe. Heck, from Europe came the first mass-marketed diesel cars in the US - bearing the Volkswagen emblem in the 1970's.
Is there any good reason why, in light of all of these conditions, there have been times in recent memory when diesel was substantially cheaper than gasoline?
The biggest reason actually has not been stated yet.
In November 31% of the diesel refined in the US was exported.
This is perfect for the refiners because they sell their products to countries that will pay more for it. It then restricts the supply in the US. Since the demand for diesel is high the elevates the diesel cost in the US. Perfect storm. Nothing personal. Just business.
Combine a restricted supply do to exportation with fall harvest diesel demand, switching diesel to a winter blend, and winter home heating oil demand you have a big difference in price. Now summer will be interesting if the cost of oil remains low. Normally , diesel prices drop in the spring because of lowered demand and reverting back to a summer blend. Typically petrol prices rise in the spring / summer due to increased demand. We could be setting up for some interesting diesel prices compared to petrol.
Granted my last tank of diesel was $2.45 a gallon. Hand calculated 49.1 mpg
Diesel does have more BTUs per gallon so you are buying more energy per unit. Combined with the fact a diesel engine is more efficient than a petrol engine it works pretty well.
This trend started with the ultra low sulfur diesel around 2007. (I am theorizing here) US refineries were the first to make it. So when the rest of the developed countries started requiring it they had to import it. That is when the exporting trend started. If you look at the exporting trends on diesel it is pretty amazing and does seem to coincide with the cost of diesel rising above petrol. Although the initial requirement for ULSD in the US spiked the cost of diesel. Since the refiners were passing on the cost of the new equipment.
Here is a past post to back up my comments with facts....
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I found some interesting information...I have always heard that the US exports a lot of diesel to markets that will pay more for it and as a result it helps keeps the prices elevated here
Looks like we exported 31% of the diesel refined in November.
I also find it interesting that we are refining A LOT MORE diesel than gas. We have been since at least 2010...as far back as the charts go on that website.
Weird. We are refining MORE diesel than gas. Wouldn't that serve to push diesel prices down? Or is it something to do with gas reserves?
Last edited by wankel7; 01-14-2015 at 09:50 AM..
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