Why Is Diesel More Expensive Than Gas?
In a recent post
I discussed diesel-powered cars’ cost-effectiveness, or lack thereof, in this era of rapidly rising diesel prices. But why, exactly, has the cost of diesel skyrocketed over the past few years?
I discussed two contributing factors in that post. One was increased demand for heating oil in winter months -- diesel and heating oil are refined in such similar ways that demand for one essentially amounts to demand for the other. But merely seasonal spikes in demand can’t explain why the price of diesel has vaulted past that of gasoline.
I also mentioned the recent advent of ultra low-sulfur diesel fuel, which has added complexity to the refining process. But surely the new refining procedure can’t be that much more complex. Indeed, an article we featured a couple years ago included a diesel expert's estimate that the new process would add a measly 4-7 cents per gallon to prices at the pump. So that's probably not the answer either.
There may be more factors behind the rising cost of diesel than one might think. We suggested some additional possibilities in the article I just cited.
For one thing, Hurricane Katrina wreaked havoc on American oil-refining capacity, which drove up prices. It's been a few years now, though, and refining capacity is back to normal -- yet if anything, diesel prices are higher in most places today than they were immediately following the hurricane.
For another, global demand for diesel is on the rise as fast-developing countries like China and India scramble to fuel their expanding economies. This seems like a more compelling explanation, since smoke-belching diesel trucks are a common sight in these countries. But is it enough to explain why formerly bargain-priced diesel pulled even with gasoline toward the end of 2004, and is more than 67 cents higher on average as of this writing?
If you're wondering, yes, the US government taxes diesel at a higher rate than gasoline -- but only by six extra cents per gallon. Not only is this a negligible amount, but it also hasn't changed lately, so it can't help us understand why diesel prices have been going through the roof.
In the end, the best explanation may be, as William of Ockham believed, the simplest one. Perhaps diesel prices have gone high and stayed there because that's what the market will bear. In that older article, we asked a petroleum industry insider why oil companies were charging so much for diesel. The insider's telling reply:
"Because we can."
Josh Sadlier, Associate Editor, Edmunds.com
- Posted by
- Josh Sadlier April 4, 2008, 6:32 PM
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- Fuel Economy, Life with Cars
at the end of the day... Thats really what it comes down to.
Thanks for trying to answer this annoying question. Ultimately, so many factors about the oil industry, distribution and pricing are shrouded in mystery. It seems that raising the price of diesel at a time when passenger diesel cars are about to make a comeback, is a way to kill any interest in that alternative form of transportation. Extending this paranoid thinking even farther, it could be a move to kill interest in diesel so that biodiesel is also eliminated. Eventually we will run out of petroleum, but until then the big oil companies will seek to control the market. Skyrocketing diesel prices is their best way of doing that but, man, they are going to piss off a lot of truckers.
I think phillip certainly has part of it. They're intentionally trying to (and succeeding to a large degree) kill interest in a long time proven technology.
I think there's another part to it. They want to cripple our economy. The infrastructure that distributes our goods and produces runs on diesel. What better way to cripple the US than to run those expenses through the roof?
and when they cripple our economy that buys their oil... The will have how much money? oh ya, thats right 0.
that kind of thinking is just short sigthed. Its like you being on a cruise ship, you hate the captian, so you sink the ship with you on it.
opfreak, they have no shortage of buyers for oil. More importantly, their religion tells them "death to America" and that overrides all else. They would like nothing more than to see us brought down.
I'm selling tin foil hates here guys. 1 for 2 special.
Brn,
Could you clarify whom you mean by "they"?
I'm guessing "Evil Arab Countries With Huge Oil Reserves"?
As far as that goes, Opfreak's right -- whatever you may think of their religious and political views, leaders of oil-rich Arab countries most certainly want us to keep buying their oil. Ergo, they couldn't want us to be "brought down," because they'd be losing perhaps their important customer.
Note too that the US has done much to entrench the power of said leaders despite their domestic unpopularity. In other words, they owe us one.
Josh
Csaba Csere wrote a great article on this last month: http://www.caranddriver.com/features/columns/c_d_staff/the_steering_column/should_american_vehicles_go_diesel_just_when_the_world_is_running_short_of_it_column
oh, and for those curious, his name is pronounced 'Chubba Chedda'
The URL is too long, Lee (if you're using Firefox...it's fine in IE)!
Sorry for the too long URL, here it is: Csaba Csere's diesel article
With today’s issue about gas, it would be wise to get started on saving fuel. How to save on fuel? There are six things you can do to be a real fuel saver such as lighten up, go easy on your foot, maintenance is the key, know your ride, it’s all about aerodynamics and now know your fuel. You won’t just do Mother Earth a favor. Your pockets will breathe a huge sigh of relief as well.