Car Portal » Diesel Fuel Prices

What Can You Do About Rising Diesel Fuel Prices?

admin — Mon, 29 Mar 2010 07:35:09 +0000

Diesel fuel is one of the most important commodities on the economic landscape. The reason for this is that the transportation used in almost all aspects of the economy is fueled by diesel engines. Rising diesel fuel prices usually translate to rising costs of products and services. In order to know what can be done to slow down this increase, you as a consumer need to understand its causes.

Elements of Worth

There are several basic elements that determine the worth of a gallon of diesel. About sixty percent of the cost of diesel reflects the price of crude oil, which is raw material for diesel production. Crude oil is purchased from oil producing countries and subsequently brought to refineries where the ultra-low sulfur diesel, among other petroleum products, is extracted. Given a barrel of crude, a refinery will be able to distill about one tenth of a barrel of diesel. Refining accounts for nearly twenty percent of diesel fuel cost.

The remaining elements of the cost of diesel fuel are government taxes and the expense of marketing and distribution. A ten percent excise tax is levied onto all fuel products that are manufactured in the country. Although foreign fuel avoids this, it is generally cheaper to buy locally refined fuel as import taxes generally translate to higher unit price. Marketing and distribution only makes up five percent of total diesel fuel cost, but this can often be the most volatile factor affecting the value of diesel fuel.

Origins of Increase

Basically, the price of everything is dependent on supply and demand. If supply is low and demand is high, prices will go up. If supply is plentiful, the price will stay steady, and may even decrease when demand wanes.

Crude oil supply is dependent on oil producing countries, so anything that disrupts their production activities, like wars or economic embargoes, will drive the price of both world crude and diesel up. Refining costs are generally pretty stable, but both local and foreign companies compete for refined fuel. If the demand of foreign countries for the diesel produced by local refineries increases, this can ultimately result in elevated fuel costs.

The most unstable factor that affects diesel fuel is undoubtedly local marketing and distribution. Diesel fuel is in such high and constant demand that fuel stockpiles are generally pretty shallow. This means that if there is a sudden spike in fuel consumption, the warehoused supply will not be enough and this will drive the price of fuel up. Another factor is distance; consumers close to refineries tend to pay less because they avoid transportation costs. Local competition also plays an important role in regulating fuel prices.

Control Stems from Understanding

World supply and demand, international politics, economic pressures, all of these play interrelated roles in the cost of fuel. Though they seem beyond the comprehension of the non-economist layman, it all really boils down to supply and demand, and this is something anyone can understand. Saving fuel and lowering consumption is not only good for the environment; it decreases demand, and ultimately, cost. Programs which promote peace and goodwill among nations do not only make a better world; they result in less disruption of supply lines, and again, decrease fuel costs.

The factors that affect diesel fuel prices seem complex, but an understanding of the basic principles can empower the individual consumer. Unsurprisingly, it would seem that doing the right thing really is the right thing to do.

Continue Reading >> What Can You Do About Rising Diesel Fuel Prices?.

Why Diesel Fuel Prices Are High

admin — Tue, 02 Mar 2010 05:44:22 +0000

Diesel fuel prices used to be less than gasoline prices. But a lot of people are now wondering why diesel fuel costs higher than gasoline. The primary reason is the increasing global demand. The other factors would be environmental restrictions and higher federal taxes. (All of these will be tackled in detail below.)

What people do not realize is that the pattern shifts. During the summer, people tend to use their vehicles for vacations; this in turn increases the cost of gasoline. During the winter, people tend to stay at home and generate a high demand for heating oil; this in turn increases the cost of diesel fuel. The correlation between heating oil and diesel is that they are similar fuel and that the price of the heating oil tends to set a floor for diesel.

The widening spread between the prices of diesel fuel and gasoline is partly due to the lull in the demand for gasoline, which can be attributed to high prices and soft economy. If people would just increase their consumption as rapidly as before, then the prices of gasoline would be higher. In return, the spread between the prices of diesel fuel and gasoline will not be as wide as it is now.

Increasing Global Demand

There is an increasing demand for diesel fuel worldwide-that is, in the United States, Europe, China, and India. In Europe, more vehicles with diesel engines were sold in the past few years. More than 50 percent of new registrations for 2007 were diesel-consuming vehicles. In India, the same trend applies: the numbers of new vehicles sold have doubled in five years, and 30 percent of which is diesel-powered. This percentage is projected to reach 50 percent by 2010. In China, the increasing demand for diesel fuel is in direct proportion with its economy. With them hosting the Olympics plus the earthquake that hit them recently, higher demand for diesel fuel is foreseen to avoid interruptions and to run heavy equipment and emergency generators.

Environmental Restrictions

The shift to ultra-low sulfur diesel fuel in the United States is an ongoing project since 2006. Its goal is to apply this standard to all on-highway diesel fuel by December 2010. There are also standards for off-highway diesel fuel such as fuel for generators, construction machinery, and marine use. This drastic change is an expensive process altogether as it will target the production of all diesel fuel, which in turn has affected the selling price of diesel fuel. A projection has it that this expensive process would require refiners to invest a large amount of money, and this will make them increase the prices of diesel fuel between 2007 and 2011. Moreover, a production bottleneck will probably result in higher price spikes.

Higher Federal Taxes

The tax for diesel fuel is higher than the tax for gasoline. And naturally, the higher the tax, the higher will be the price at the pump. This has been the trend for several years, and this is the explanation why diesel has sold for an average of 1.3 percent more than gasoline over a specific period of time.

There are more factors affecting diesel fuel prices. Having an understanding how the pricing works will help you find ways to go around the soaring prices. And with this knowledge, you can have a grasp of the trends and create your own projection to aid your budget planning.

Continue Reading >> Why Diesel Fuel Prices Are High.

Projection for Diesel Fuel Prices

admin — Wed, 03 Feb 2010 03:42:45 +0000

For as long as the prices of crude oil and the demand for distillate fuels are maintained at a high level, the retail diesel fuel prices will in most likelihood be high, too. The Energy Information Association (EIA) has released a report on what is likely to happen for remainder of 2008 and 2009 for the United States. It states that the national average retail prices for diesel fuel will reach its highest point during the third quarter of 2008 then it will decline by the fourth quarter of 2009.

However, these are just projections; hence, there is no assurance or guarantee because it can be greatly affected by the instability and unpredictability of the prices of crude oil and petroleum products. Among the many factors that affect the prices, below are the main ones that are faced by United States, especially the West Coast countries:

The Effect of Sulfur on Prices

The Environmental Protection Agency (EPA) standards for diesel fuel sulfur content can also alter the prices for diesel fuel. What needs to be taken into consideration is the logistics of delivery of the Ultra-Low Sulfur Diesel (ULSD) fuel to retail service stations. Most of these products are transported via pipelines to reach the bulk terminals then to tanker trucks then finally to the retail stations. Contamination may happen to the ULSD fuel because these pipelines, storage, and local distribution systems also serve to deliver other diesel fuels and petroleum products, which have higher sulfur content. If a batch of ULSD fuel gets contaminated, it might not be an option to mix it with additional low-sulfur product to bring back its sulfur content to the original level. The contaminated batch has to be returned to get reprocessed in a refinery, and this solution is a difficult and expensive one. More so, the production of ULSD fuel entails a big expense to begin with. So any problems that might arise along the way with regard to delivery will just add up to the expense.

Geography and Taxes

Another factor that affects the prices of diesel fuel in the United States is the geography. West Coast countries have generally higher prices than the other parts of the country. This holds true especially for California because of the taxes and issues on the supply. These countries add more tax-that is, they combine the state and local taxes, and add another tax value on top of the federal excise tax and state tax. Washington is one of the countries that have the highest tax.

Geography and Relief Supplies

The West Coast countries also have higher prices for diesel fuel because they have relatively fewer supply sources. Because majority of the refineries in this region are located in California, a single refinery that encounters difficulties in operations will greatly affect the diesel supply. In turn, this may elevate the prices because there will be fewer supply to meet the high demand. More so, the West Coast is very far from the Gulf Coast and other foreign refineries-that is, any fluctuation on supply-demand will generally result in price fluctuation because it will take some time to transport relief supplies to these countries. The farther the relief supplies are, the higher the diesel fuels prices will be and the longer it will remain at such price.

Continue Reading >> Projection for Diesel Fuel Prices.

Diesel Fuel Prices to Skyrocket – Water as the Next Best Option

admin — Thu, 07 Jan 2010 02:17:56 +0000

The title says it all, and here's why: first of all, everyone's feeling the pinch of fuel prices. And it's not just the average Joes, it's everyone. Yes, even those who are high up in the economic world — those who own airlines, investment companies, real estate, you name it. We're hearing about airlines asking passengers to pay for their airline food so they don't have to raise prices. Investment companies are crashing in the United States and the whole world feels the earth quake. Real estate firms are closing down buildings and liquidating their funds to stay afloat. All this because of diesel fuel prices.

If people were a tad ambitious or daring, we could go for something that has been proposed a few years ago as an alternative to diesel fuel — water. First of all, it makes the car start and run. That's the most important thing we need to consider when dealing with alternative fuels. Second, it's inexpensive as compared to gasoline or diesel. Even if we say that gasoline is cheaper than diesel, there is still a substantial difference between using gasoline or diesel and using water. There may be some power technicalities, and car aficionados who love racing would attest to that, but the reality is that it works. Surveys show that people would consider using water as fuel for their cars if it means saving buckets of money that goes to the cashier at the gas pump.

The concept of water being used as fuel is simple. You will be using Hydrogen gas or H2 gas instead of diesel fuel or gasoline. Right now, technology still doesn't permit us to utilize 100% Hydrogen gas on a car. It is usually mixed with a little bit of diesel, but still it reduces the money you'll have to pay for diesel fuel. When you use the hybrid of diesel and hydrogen gas in your car, your car runs efficiently and it will get you to where you need to go.

How does water fuel come about? Here's a quick look at the science behind this amazing piece of technology. Electrolysis is the process by which water is converted to usable hydrogen gas. The device that initiates the electrolysis gets its power from the car's battery — the circuit is fired up and hydrogen gas is ready to go. The gas is then released into the engine's air intake system where it travels through the combustion chambers and mixes with a little bit of diesel. This economical mixture of hydrogen gas and diesel makes for a perfect combination that maximizes the car's mileage and saves you gas money which is essentially the whole point of using alternative fuels.

You may think that there will be some complicated mumbo jumbo that you need to figure out before your car can run on water, but it's really easy to set up. Just make a visit to the hardware store, get all the things you need, come back home, get on the internet, and search for step by step instructions. That's basically all you need to do to save on gas money. Soon enough you'll see your savings skyrocket as high as the diesel fuel prices themselves.

Continue Reading >> Diesel Fuel Prices to Skyrocket – Water as the Next Best Option.

The Basic Fact Sheet on Diesel Fuel Prices

admin — Thu, 10 Dec 2009 23:37:31 +0000

As consumers, the basic basket of goods that we often purchase in the course of everyday involves diesel and other fuel products, making us susceptible to the impact of diesel fuel prices. Diesel fuel, gasoline, and oil are used not only in running cars and other transport vehicles, but also are used for cooking, heating the home, and powering diesel-powered equipment like snow-blowers, lawn-mowers, and the like. A huge chunk of expenditure goes to purchasing fuel to run these vital activities, which would justify trying to understand as much as one can about how it is priced and where the product itself is from.

To start with, diesel fuel is one of the refined versions derived from basic crude oil. Other forms of crude oil that results from refining include gasoline and distillate heating oil. This fuel type was named after Rudolf Diesel, the German engineer who created ignition engines that make use of diesel fuel.

Diesel petroleum is in fact a distillate of crude oil. While there are many types of distillates that can be derived from crude oil, Number 2 distillate is what is distributed for use in vehicles and equipment in many countries; it is also the same oil base used for distillate heating oils used to heat buildings and run industrial plants.

The chain of processes that create the value inherent in diesel fuel begins from the moment crude oil is purchased. Crude oil, as mentioned previously, is the base ingredient from where diesel fuel is derived. This base ingredient is traded internationally, with price determined by supply and demand dynamics. Crude oil is primarily produced by oil-exporting countries, all of which often belong to big oil cartels that dominate the supply dynamics in the market.

The demand for energy is not limited to the United States, but expands across Europe, China, and India. The thirst for energy for consumption occurs both in the level of industry, as well as individual consumers. On the consumer level, this means that the strong preference for diesel-powered vehicles has led to the need for diesel fuel in order to maintain the operations of these vehicles. In the industry level, expanding economies like China and India, and more stable economies like European ones, all rely on the supply of diesel fuel to run many of their transport sectors and even many of their industries. The high demand from both sectors has driven the prices of diesel fuel up: with limited supply, people use money in order to gain preferential access to the resource.

In addition, governments play a role in determining how diesel fuels arrive at the point of mass consumption. Governments levy hefty taxes on oil refining and distribution companies, many of which already run the regular gas pumping stations. Also, governments have required the reduction of sulphur content in diesel fuel, creating an expensive additional stage in the refining process to reduce sulphur. The additional burden of tax, the cost of operating distribution through gas pumping stations, and the cost of building infrastructure to enable them to comply with government ordinances have driven diesel prices to higher levels even if production costs considerations were ignored.

Knowing these drivers, and just what this resource is all about, allows consumers to better appreciate the dynamics of the energy industry. They will also be able to use their common knowledge of market dynamics in order to predict or protect themselves from diesel fuel prices inflation.

Continue Reading >> The Basic Fact Sheet on Diesel Fuel Prices.

Combating High Diesel Fuel Prices

admin — Fri, 13 Nov 2009 22:16:52 +0000

With the gasoline and diesel fuel prices increasing, people have come up with various solutions to go around this situation. One of these solutions is the use of diesel fuel additives. Primarily they are known to increase lubricity of fuel, hence decreasing the wear and tear of engine parts. What is more is that it also can increase gas mileage.

Being a highly complex fuel, diesel fuel's chemical structure changes from the time it leaves the refinery to the time it is pumped into holding tanks and fuel station to the time it gets pumped into the vehicle. Oxidization and structural changes occur in the fuel molecules. The energy per unit volume of the fuel can change during this phase, and this is what will cause your engine to have poor performance.

To combat the effects of fuel degradation and increase the fuel's cetane value (discussed in detail below), the right type and ratio of fuel additives have to be used. Among a myriad of benefits, the engine will be able to obtain more power from a gallon of fuel.

Diesel fuel has more energy per gallon as compared to gasoline. The three types of diesel fuel are 1D, 2D, and a combination of the two. The lighter grade is 1D, and it offers less energy than 2D. It is more commonly used to reduce, if not eliminate, the gelling of fuel during cold winter climates; some people combine it with 2D.

The cetane rating denotes the diesel fuel's ignition quality. The higher the rating, the easier the fuel burns evenly and the more power is produced. The average diesel fuel is at the 40-cetane level. Large diesel trucks and diesel pickup trucks prefer a cetane rating in the 45- to 50- level; this is considered as the premium diesel. However, this is not a general categorization-that is, the state's regulations will dictate at which cetane rating is diesel fuel considered premium.

You should check with the fuel station with regard to the cetane ratings of the fuel they are selling. The higher the cetane rating, the better the drivability as well as reduced emissions. Moreover, the driver of the vehicle can feel the change in power (for the better).

Choosing the right diesel fuel additive can assure you that the diesel fuel will perform at its maximum because of its optimum quality. Here are some of the effects of a good quality diesel fuel additive:

- Reduces Cylinder Wear:

It neutralizes acids during combustion. It minimizes the wear of the acidic cylinder and it reduces the rate of engine oil depletion; thus, maintaining the quality of the engine oil for better protection.

- Minimizes Soot Loading:

It cleans fuel injectors and piston rings for better combustion and sealing. This reduces soot loading, controls soot-related wear, and increases engine oil viscosity.

- Stabilizes Fuel:

Fuel degradation increases deposits, which can promote the plugging of filter. The additive improves oxidation and thermal stability of the diesel fuel.

- Improves Fuel Economy:

It cleans dirty injectors as it improves the acceleration and restores horsepower, and in the long run it will enhance performance.

- Improves Water Tolerance:

An alcohol-free additive protects fuel systems against water contamination, helping to prevent emulsions. It also protects the metal against rust.

To combat the increasing diesel fuel prices, you can consider using a diesel fuel additive and experience the change in your expenses as well as the drivability of your vehicle.

Continue Reading >> Combating High Diesel Fuel Prices.

Diesel Fuel Prices versus Gasoline Prices

admin — Sat, 17 Oct 2009 19:49:11 +0000

Why Diesel Fuel Is More Expensive Than Gasoline

History has it that the gasoline prices have been higher than the diesel fuel prices. But then again, this does not always hold true. During some winters, the demand for distillate heating oil increases which also raises the price of diesel fuel-so much so that is becomes more expensive than gasoline.

In the United States since September 2004, the price of diesel fuel has been by and large higher than the price of gasoline all year round and this is due to numerous reasons. The worldwide steady increase of demand for diesel fuel and other distillate fuel oils has put pressure on the tight global refining capacity-more so with the strong demand of such products in China, Europe, and the United States.

The transition from low sulfur diesel (LSD) fuel to ultra-low sulfur diesel (ULSD) fuel in the United States has affected the diesel fuel production and distribution costs. This is due to the new Environmental Protection Agency (EPA) standards for diesel fuel sulfur content.

Another reason for this shift in the norm between gasoline and diesel fuel prices is that the federal excise tax on the latter is higher than the tax on gasoline.

The Primary Factors Affecting The Price Of Diesel

Cost and supply of crude oil – The worldwide supply and demand of crude oil determines its price, and the rising demand has put great pressure on the supply. The Organization of Petroleum Exporting Countries (OPEC) has all of the spare production capacity and possesses a significant percentage of the world's crude oil reserves. The prices spike as a response to the disorder in the international and domestic crude oil supply.

Tight refining capacity and international diesel fuel demand – Refineries in the United States have been in operations at around 90-percent capacity. Other countries depend more heavily on distillates and diesel fuel than does United States, thus making the refining capacity tight worldwide. Competing international demand for refined distillates affects the price of diesel fuel in the United States.

Product supply/demand imbalances – The prices of other commodities are more stable as compared to the prices of fuels because of the dependence on petroleum and because there are few alternative fuels in the market. The stocks decline fast if the supply declines unexpectedly. When stocks are low and declining, some players may bid higher for the product. Prices will stay high if the diesel fuel transportation system cannot support the flow of surplus supplies.

Seasonality in the demand for diesel fuel and distillates – The price of diesel fuel slowly rises during the fall, declines in the late winter, rises through the early spring, and then declines in the summer. The demand by farmers during the different seasons creates an upward pressure on the diesel prices.

Transportation costs – The distance between the retail location and distribution terminals and refineries has a direct relationship with the transportation cost-that is, an increase in one increases the other.

Regional operating costs and local competition – Depending on the location of the dealer, the cost of doing business varies which include wages and salaries, benefits, equipment, lease, insurance, overhead, and state and local fees. Even if retail stations are in close proximity to one another, they still have differing costs. Another factor that affects diesel fuel prices is the number and location of the local competitors.

Continue Reading >> Diesel Fuel Prices versus Gasoline Prices.

What Constitutes Diesel Fuel Prices?

admin — Sun, 20 Sep 2009 18:04:31 +0000

Tracing its name from its German inventor, Rudolf Diesel, diesel fuel is what is used in the compression ignition engines of motor vehicles. It is important to a country's economy, quality of life, and national security. Any fluctuation of its price will have an effect on how people live because of its direct and indirect relationship with the other consumer products. There are different factors that determine diesel fuel prices but first we have to have an understanding of how it is produced and used.

Diesel Fuel Quality and the Environment

From crude oil, there are a lot of products that can be produced. These are gasoline, diesel, other distillates (heating oil), heavy fuel oil (residual), jet fuel, liquefied petroleum gases (LPG), and other products. There are different grades or types of petroleum diesel. The Number 2 type is the main source for motor diesel fuel utilized in the United States. It is the same type used for heating buildings and in the industry.

It has relatively low sulfur content, which is an important characteristic tested for diesel fuels. In 2006, the new Environmental Protection Agency (EPA) standards for diesel fuel sulfur content were implemented. Ultra-Low Sulfur Diesel (ULSD) fuel which has a sulfur content of less than 15 parts per million (ppm) had to be sold in the United States, which in turn replaced most of the Low Sulfur Diesel (LSD) fuel.

Diesel engines can be found in nearly all semi-trucks, delivery vehicles, buses, trains, ships, boats and barges, as well as farm, construction and military vehicles and vehicles. Because of this widespread use, people have always been thinking of ways to manufacture products that are safe for the environment. Biodiesel falls under this category and is produced from vegetable oils, animal fats, or recycled restaurant grease. Its name denotes that it is biodegradable and can lessen vehicle emissions of carbon monoxide, hydrocarbons, and particulates.

Diesel Fuel Production and Delivery

In the United States, most diesel fuel that is consumed is produced in their local refineries. Additionally, a small percentage of fuel is mainly imported from Canada and the Virgin Islands. From both local and imported crude oil, diesel fuel is manufactured by the local refineries and it is transported by pipeline from these refineries and ports to the terminals in close proximity to the main consuming areas. Then it is put in tanker trucks for delivery to retail service stations.

Diesel Fuel Cost Components

Inclusive in the cost to manufacture and transport diesel fuel to the consumers are the costs of crude oil, refinery processing, marketing and distribution, and retail station operation. The costs and profits of the refiners, marketers, distributors, and retail station owners are reflected in the retail pump price. The comparative share of these cost components to the retail price varies over time and among the country's regions.

The price at the pump also is inclusive of federal, state, and local taxes. In other states, counties, and city governments levy additional taxes. Local market conditions and other factors such as the location and the marketing strategy of the owner are reflected in the retail price as well.

The components of diesel fuel prices can be broken down into the following (from highest to lowest percentage): crude oil, refining, taxes, and distribution and marketing. Knowing this information will give the consumers a clearer picture why the prices are pegged at such and why they fluctuate.

Continue Reading >> What Constitutes Diesel Fuel Prices?.

How the Industry Arrives at Diesel Fuel Prices

admin — Mon, 24 Aug 2009 15:55:42 +0000

The movement in diesel fuel prices has had a strong impact in a variety of industries that makes use of diesel not only in running machinery, but also in transporting goods. This is because the use of diesel in transportation and energy underlie a huge number of functions in everyday life. Majority of delivery trucks, public transport vehicles like trains, buses, boats, ships and barges, and even construction and farming equipment, make use of engines that run on diesel fuel. This means that as the prices of diesel fuel soar, the costs required in facilitating the activities of which these vehicles and equipment take part in also increase. This either reduces the amount of profit these industries can have, or makes them have to choose the unfortunate option of levying costs on the retail prices they offer their consumers.

Regardless, anyone who has a stake in the way diesel prices change or move should at least attempt to understand what drives these fuel prices from going up or going down. By understanding what drives these movements and how the prices are determined, one is able to better foresee and interpret the various economic indicators that usually point to a time of increases in prices and the like.

In order to determine how fuel prices are derived, it's important to first look at the costs associated with its production for availability in the retail market. The first cost to take into consideration is the cost of buying crude oil. Crude oil is the primary ingredient required in the production of a variety of fuels, including diesel fuel, gasoline, and even distillate heating oil. Crude oil prices are traded in the international market, which subjects it to the dynamics of international supply and demand. The limited supply of available crude oil from oil-producing countries, and the growing need or demand for energy worldwide has helped maintained competitive prices in the industry.

Next, crude oil enters the process of refining. This is the stage where crude oil is processed into the different forms of fuel it will become. Gasoline and diesel fuel primarily differ in the refining process that is used for it. Originally, better-refined gasoline was more expensive than diesel fuel; however, the costs of processing gasoline were overrun by the price impact of excess demand for diesel fuel. Diesel fuel and distillate heating oil, on the other hand, are processed using the same refining process. This is the reason why the increase in prices in one affects and increases the prices of the other.

Costs in order to bring the refined oil to the market-both marketing and distribution-also add material and at times, expensive costs to diesel fuel. This is because the transportation of oil, the marketing and advertising operations of the oil firms, and the manpower necessary to run all these operations, all involve costs that the company must incur in order to sell the final refined oil product to the market. Gasoline stations from where people get both gasoline and diesel fuel also incur costs for operations, a part of which is also levied on the retail prices of refined oil.

Over and above these production costs, governments levy taxes on oil products, creating greater impetus to increase fuel prices. It is the combination of these cost contributors that determine the dynamics of diesel fuel prices in the retail market.

Continue Reading >> How the Industry Arrives at Diesel Fuel Prices.

Understanding the Increase in Diesel Fuel Prices

admin — Tue, 28 Jul 2009 14:00:14 +0000

It was only in recent years that diesel fuel prices soared above gas prices. These two fuel categories used to have different peak seasons, with gasoline prices enjoying greater primacy in pricing over longer months. Gasoline then had the biggest gap in prices from diesel fuel during the summer months, when demand for gasoline peaked as a result of families taking long drives across states. Meanwhile, diesel fuels scored higher prices during the winter months, when the demand for distilled heating oils used at home increases as well. This is because distilled heating oil and diesel fuels are refined in the same facility using the same process, causing the demand for diesel fuel and distilled heating oil to act in a parallel manner.

The increase in the base price levels of both gasoline and diesel fuel has been primarily driven by the worldwide increase in crude oil prices. Crude oil is the basic ingredient from where different forms of fuels are derived from.

However, there are three particular reasons why the demand for diesel fuel have increased over time, the first being increasing demand, the second being the slackening demand for gasoline, and third being new environmental restrictions on gasoline.

First, there has been an increasing demand all over the world for diesel because of the increase in number of diesel-powered engines. In years when gasoline prices soared over diesel prices, car manufacturers produced cheaper diesel-powered vehicles in order to capture the market of consumers who wanted to save on gasoline prices. However, the fact that these diesel-powered vehicles have outsold gasoline-powered ones has obviously caused more people demanding diesel fuel to run their engines. This trend is true not only in the United States, but also in China, Europe, and India. With a limited supply of diesel fuel produced annually, increases in demand causes the price to distort upward.

In addition, the relative increase of prices of diesel fuel products have made gas prices appear much cheaper, especially with less people choosing to buy gasoline. Increasing consumption of diesel fuel has driven up its prices, whereas a near steady to decreasing consumption of gasoline has led to its price to remain stable, if not decreasing as well over time. This increases the relative price gap between the two.

Lastly, government legislation has caused the regulation that requires the reduction of sulphur content in diesel from 500 million parts per gallon to 15 parts per gallon. The process of reducing sulphur in diesel to this extent will cause greater expense in refining and producing retail-ready diesel fuel for consumption. In the year 2006, the goal was to have 80% of motorist traffic complying with this ordinance; by 2010, 100% of diesel available in the market must comply. As with all industries, the cost of additional stages of processing will be levied on the final retail prices of diesel fuels, causing a greater increase in prices above the already significant impact that high demand has on it.

When looking at diesel prices, it is important to appreciate what drives the increases in prices, and even the standards for when people say prices have increased. For the latter, the relative increase in diesel prices in conjunction to the relative stability or decrease of gasoline prices has increased the perception of more expensive diesel prices. The drivers for increases in diesel fuel prices, however, remain to be that of increasing demand for the limited supply of diesel fuel, as well as costly processing of diesel in order for it to comply with environmental standards.

Continue Reading >> Understanding the Increase in Diesel Fuel Prices.