Why is Diesel More Expensive Than Gas?

Dieselgraphic

Many drivers probably remember a time when diesel fuel cost less than gasoline, or at least was about the same, but today the average price for a gallon of gasoline is $3.79, while a gallon of diesel runs $4.55. So what gives? They're both made from the same stuff, right?

True. However, there are a few factors driving up the cost of diesel. First of all, much of the diesel used in the U.S. is refined in Europe, where, due to favorable tax policies and fuel efficiency, diesel cars have made a major comeback. This increases demand for diesel fuel. Meanwhile, here in the states high gas prices have led Americans to consume less gasoline. In turn, refineries have scaled back their overall production to adjust to the lessened demand. However, the demand for diesel fuel remains the same even though refineries are processing less fuel overall.

Lawrence Goldstein of the Energy Policy Research Foundation told The New York Times that "it is as if sirloin had become so expensive that demand dropped, so farmers raised fewer cows, reducing the supply of hamburger — but hamburger remained as popular as ever."

It is also important to note that the federal excise tax on diesel is six cents higher per gallon than gasoline, according to the Department of Energy.

High diesel prices create an interesting conundrum for carmakers like Mercedes and BMW, which are trying to bring clean diesel vehicles to the U.S. These vehicles, while efficient, might now face a tough consumer response.

So You Think Gas Costs a Lot? (The New York Times)

By Stephen Markley | May 19, 2008 | Comments (10)
Tags: In The News

Comments 

Sam

There's actually more to it.

First of all the EPA requires ultra low sulphur content. That's costs quite a bit more than something like #2 heating oil, which is otherwise about the same. Refineries have to switch over from one to the other - more cost.

The EPA also does not allow the low sulphur diesel to get "polluted". So if a pipeline is sending something like jet fuel and is not properly flushed before hand, a small amount of the jet fuel could "pollute" the diesel, requiring a return for rerefining. Stupid bureaucracy? Of course it is, but when have you ever met any bureaucrat with an ounce of common sense.

Then we have the lack of domestic refining capacity - due to the 3 decade efforts of tree huggers. With a population growth of over 6o Million in the last 3 decades, the US does not have one new refinery and tree huggers do everything in their power to block even the expansion of older refineries. That means that much diesel has to be refined in other places, incurring transport and exchange rate costs.

The Dep't of Energy has a great deal of info about the diesel problems on their website.

tommy

bunch of crooks are running america, dismentle america kick all european white people out and give it back to the real americans, the native and mexicans

katie

i think that this is rediculous it is CRAZY.

MY CAR IS RUN OFF OF DIESEL AND I HAVE COMPACT CAR and i pay $300 i am broke after buying gas i am dead serious xoxoxoxoxoxoxoxox
katie kat

JIM G.

Not only do I remember when diesel was about the sane price as gas, I remember when it about 1/2 the price of gas. The fact was, and still is, a gallon of crude yields about twice as much diesel as high octane gas. This is clearly a case of the oil companies charging as much as the market will bear, not what the product costs to produce.

Roy

Never ceases to amaze me how uneducated the average American like Jim G is. Naturally, the inability to comprehend basic economic theory coupled with a public school education gives you, ta-da, citizens like Jim G. Let's not face facts when it's easier to claim the oil companies are gouging us.

ROYGAY

Never ceases to amaze me that roy adds nothing to this blog other than the criticism from an uneducated petroleum spokesperson. The fact that she chooses bash on pure ignorance and clear inabilty to explain such an easy subject matter for her, is rather amusing. May you please provide an easy explanation of the economic theory? Keep this in mind roy, TA-DA to you Mrs. Perfect!

Walt

The problem with the artificially higher pricing for diesel is that it affects every aspect of our economy. From the transport and processing of the raw materials to the transport of finished products to the market, every movement and much of the production relies on diesel. At each stage, the cost of transportation is added to the end cost so that the consumer is paying for everyone's diesel fuel. Brings a whole new meaning to "fueling inflation". Apparently, the oil companies and our congress are unconcerned about increased costs that high diesel prices create. Everyone feels sorry for the trucker, but he passes on the cost with fuel surcharges as do all other diesel users. YOU are the only one paying for the greed of the oil companies. Despite all their protestations to the contrary, there is no reason other than greed for the cost of diesel to exceed that of gasoline.

Craig

Let us not forget that the oil companies only make a few cents per gallon profit while our government takes over 50 cents with zero risk !
The scoudrels are obvious

Hybrit

Fortune magazine just panned the 2009 VW TDI because of an obvious clattering sound at idle and the high price of diesel fuel, compared to gasoline.

Dodge Diesel, 2006

I can't pass on the cost of Fuel to my customers anymore. The customers have to hire the local guy, and this isn't good? The 'Locals' aren't qualified and the Customer gets bit, hard! I have decreased the area that I can stay profitable in, to the point of extinction. Bye bye

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