Why Is Diesel More Expensive Than Regular Gas? 36 comments
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Steven Mufson reports on rising gas prices:
Gasoline rose to a nationwide average of $3.246 a gallon for regular unleaded. Diesel, which has been setting records almost daily for the past three weeks, hit a nationwide average of $3.876 yesterday.
Which means that diesel is now 63 cents per gallon more expensive than regular gasoline. I don't have a graph of the diesel-gasoline spread, but I'd guess that's at or near all-time highs; it wasn't so long ago that diesel was cheaper than gasoline.
Mufson reports that "more and more Americans are driving cars that use diesel because they get better mileage," but that trend is unlikely to stay strong for long if diesel is 20% more expensive than gasoline. The calculations can get very technical, and involve resale values as well as fuel-economy considerations, but with today's fuel-injection technology it's unlikely you'll find a diesel-powered car which gets 20% better mileage than the equivalent gasoline model.
Why is diesel more expensive than gasoline? Here's the official answer, from the Energy Information Administration:
Until several years ago, the average price of diesel fuel was usually lower than the average price of gasoline. In some winters when the demand for distillate heating oil was high, the price of diesel fuel rose above the gasoline price. Since September 2004, the price of diesel fuel has been generally higher than the price of regular gasoline all year round for several reasons. Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe, and the U.S., putting more pressure on the tight global refining capacity. In the U.S., the transition to low-sulfur diesel fuel has affected diesel fuel production and distribution costs. Also, the Federal excise tax on diesel fuel is 6 cents higher per gallon (24.4 cents per gallon) than the tax on gasoline.
What that means for the diesel-gasoline spread, I have no idea. But don't expect to see the US becoming a Europe-style land of diesel-powered cars any time soon.
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This article has 36 comments:
As a nation we must institute a plan to encourage commercialization of the technology and consumer demand for the fuel. But in our exceedingly politically correct nation, it's doubtful that this will happen. Sad but true!
I encourage everyone reading this to investigate Rentech and Coal to Liquids technology. Then if it makes as much sense as I think it does, PLEASE WRITE TO YOUR REPRESENTATIVE DEMANDING ACTION!
Next, refinery limitations come into play. Since the U.S. taxes less, US drivers prefer diesel less than Europeans. Refinery runs typically produce both diesel and gasoline; so diesel is shipped to Europe and gasoline to the U.S, In the latter case, it is ofter European refiners who ship gasoline to the U.S.
So I think the "let's dieselize" adhderents are not fully informed.
The cost for refiners is less for diesel because it is one of the first cuts off the first distillation tower. Then if needed desulfur it and throw in minor amounts of additives and it's ready to sell. That's it, very simple and cheap.
For gasoline it's a whole different story. Refiners take cuts of the first distillation tower and then (to keep it very simple) use even more towers/reactors/treate... (hydrotreaters/FCCU fluid catylitic crackers/etc.) to make what we call gasoline. And then they throw in lots of additives, and finally it's ready to sell.
Now tell me again why we get to pay more for diesel when it's a lot cheaper to produce from the same barrel of crude?
And tell me why in many foreign countries diesel is cheaper at their pumps than gasoline which reflects the true cost of production?
Answer:
In the USA they simply charge more for diesel because they can and get away with it.
Let the Europeans be rational, not us.
Also agree with maxbid. We are given a Bill of Rights, but sold a bill of goods when it's a fair guess that most Americans would like to have a voice in how the mechanics behind their spending needs are engineered.
2009 Jetta 2.0T, gasoline: 21mpg city, 28 hwy
2009 Jetta 2.0 TDI: approx. 45mpg city, 55 mpg hwy
That seems like a little more than a 20% difference in mileage, more like DOUBLE.
The unfortunate part of this is the trucking industry is caught in the middle.
Thanks for the forum to Vent.
Keith
That barrel becomes aprox. 19gal. of regular gas, 8gal of diesel fuel, 4gal. of jet fuel, 11 gal. for everything else (heating,plastic, misc. manufacturing). I can see (a LITTLE) supply vs. demand impacting cost. I also believe capitol greed is rampant.
Based on the fact that they can manipulate what product they get from a gallon of crude any which way, it makes sense that refined product will be priced based on the BTU (heat) content of the product. In other words, we should expect to pay about 20% more for diesel, because it has 20% more energy in it. This would logically be offset a bit by the fact that #2 is cheaper to refine, store, transport, insure, and is not as perishable. Offsetting the price of #2 diesel higher would be the relatively higher taxes, and the relative scarcity of low-sulfur crude and refineries that can produce low-sulfur diesel.
As I understand it, the reason that diesel is taxed higher is that when it's used as motor fuel it is used in heavy trucks, and they are what do much/most of the damage to roads. Why not tax fuel by the BTU (or calorie, for you metricheads)? Why not make wheel taxes reflect the damage that heavy trucks do to roadways? Politics, I guess.
In any event, the amount of #2 diesel that gets burned in cars is a very small slice of the pie in America.
Having been an employee of several oil companies, I harbor no illusions about their capacity for venality, duplicity, and short-sighted stupidity. However, both crude oil and refined product are commodities that are sold at auction Everybody quotes the price of crude, which I find amusing because about one person in 5 knows how many gallons of oil there is in a "barrel," and so most people have no idea what the price actually means. And as a hint, no, 55 US gallons is not the answer.
But on the market page of any big newspaper you will find the "spot" price of gasoline, #2 heating oil, Jet A (kerosene), and #2 diesel (different from heating oil because of its higher "Cetane" rating, which is sort of like octane rating in gasoline. Those prices are set by a free market auction. Many buyers and sellers take part in the auction, not just the vertically integrated majors like Exxon/Mobil, BP/ARCO, Conoco, Texaco, Shell, Elf, etc. There are also independent refiners like Koch, Valero, Sunoco, Hess, Occidental, and internationals like PetroCanada, Elf, and the sinister PDVSA, the Venezuelan state oil company. PDVSA leads into the refineries that are owned in crude producing countries.
The likelihood of all these competing companies getting together to manipulate the price of product seems remote. Obviously it can be done with crude, as OPEC has shown. But crude comes out of the ground in relatively few places, while refineries, pipelines, and storage tanks can go anywhere.
All of this leaves me with the conclusion that diesel fuel is high because of these factors:
1) international demand is high (China and India).
2) #2 can be shipped long distances (like across the Pacific Ocean), while gasoline is harder to store for a long time and transport long distances.
3) The dollar is down to record lows against the Euro and Pound. Why sell fuel for funny-money greenbacks when you can sell it for real money?
That's my take on it.
Will this turn around, and diesel return to its pump price of gasoline +15%? I would guess yes, if the dollar becomes a stable currency, not the front for an economy wracked by deficit spending. As an example, take a look at Canada, where the price of gasoline in Toronto last week was $CDN 1.19, while diesel sold for $CDN 1.23.
Before you make a beeline for Canada to buy fuel, remember that those prices are PER LITER. That makes the price of diesel in Canada 1.23 X 3.78 = $CDN4.65
SEO
4) big business is good for congress because the little guys can't afford to pay the kick backs to get the lobby on their point of view
I say this requires a COLLECTIVE critical-mass movement from us citizens.
WHEW! I'm done...
This is completely false.
In the VW Golf (sold in the US), the EPA for the gasoline model is 24 MPG in the City.
The diesel version of the SAME car gets 38 MPG in the City.
38/24 = 58% MORE MPG than gasoline.
Because of the way our refiners are set up, we make less diesel per barrel of oil than gasoline.
In Europe, it is completely the opposite. They make more diesel than gasoline.
This is why we sell Europe our surplus gasoline and they sell us their surplus diesel.
The US can switch their refiners over to produce more diesel per barrel of oil.
"maxbid" is correct except for the "they simply charge more.....because they can and get away with it" comment.
It is simply supply and demand.
There is a quickly growing demand for diesel in the US because it is a superior fuel for cars.
But, because we have to import it, that adds additional costs to get the fuel to American drivers.
If we update our refineries to produce more diesel (like Europe does), the price will come down.
(Europe's high price at the pump is due to taxes, not refining.)
Some mentioned about the additional cost of producing low-sulfur diesel as to why the price is higher.
This is true, but the same thing happened to gasoline when we went from leaded gas to unleaded.
But, the fact still remains that after both diesel and gasoline have had this extra refining, diesel is still cheaper to produce.
When we start producing more diesel here in the US, the price will come down.
If you want to see how much of the price per gallon for diesel is taxes (by state), check out this site.
www.factsonfuel.org/im...
And, let's stop this bull of blaming the popular scapegoat, the oil companies. It's NOT the oil companies.
The ONLY ones to blame for the tight supplies are all of the Americans who drive gas-hogs.
They are purposely "wasting" our fuel.
A lot more fuel efficient vehicle will more than meet their needs in around 98% of the cases.
No matter how much fuel we have, if we continue to waste it, we will never have enough, and prices will stay high.
(PoliticiansShould DIE - Get a clue!! Low-Sulfur diesel is NO different then when we switched to Unleaded gasoline. There IS a CLEAR improvement in air quality.)
"The average new car on the road today runs 97 percent cleaner than the average car built in 1970, thanks to a combination of cleaner gasoline and more efficient engines. As a result - although there are more Americans driving more miles in more cars than ever before - automobile-related emissions are down 41 percent since 1970."
Even with vastly more driving, emissions "are down 41 percent".
www.factsonfuel.org/ga...
The US, as in most cases, is behind the times on most everything.
We are finally trying to catch up on diesel now.
And, none of this changes the inherent benefits of diesel over gasoline.
Diesels can easily get up to 58% MORE MPG than gasoline. We've already had a vehicle that is sold in the US that gets this. (By the way - the Jetta wagon with the new Common-Rail diesel will be coming out near the end of this year - 2008.)
Diesels also outlast gasoline engines by at least twice as long (one of many reasons for their higher resale value over gasoline).
Diesel have vastly more torque than gasoline.
It was diesels that blew away the gasoline versions and won the Le Mans.
The VW Toureg's diesel not only blows away the top-of-the-line gasoline version by a full second in the quarter mile, but also gets BETTER MPG at the same time.
Near the beginning of this article: "Which means that diesel is now 63 cents per gallon more expensive than regular gasoline.".
63 cents per gallon is only 14% more when gasoline is at $4.50/gallon.
The fuel efficiency of the diesel still far outweighs this minor increase.
I dont think anyone has the solution, the market will do what it wants. The government will hold inquiries and point fingers but thats just the pot calling the kettle black.
A survey just conducted in BC indicated that 35% of drivers are cutting down on "other things" so they can continue to drive at the same level. 50% are driving less......at least when the survey was done. But slowly people will adjust and fire up the buggy to go to knitting class or bingo or tour the Rockies. Old habits are going to make us die hard..........and broke.
> "maxbid" is correct except for the "they simply charge more.....because
> they can and get away with it" comment.
>
> It is simply supply and demand.
Supply and demand is not some physical law that the universe must yield to, like gravity. It is something PEOPLE DO when selling something in high demand - they raise the price. Why? Because they can, and people will still buy. Maxbid is completely correct.
$2.85 Diesel
$1.79 reg Gas
Diesel cost $1.06 more per Gallon!
Unleaded regular $1.64
Diesel $3.19
I bought my F350 new in 2000. Both fuel prices were under $1.50 with diesel being a little cheaper than unleaded. I bought the diesel because fuel savings alone made up the difference in the added cost of the diesel engine. There is absolutely no reason that a gallon of diesel should be double of what a gallon of unleaded cost at the pump. I am only a little thankful that it's not $4.99 a gallon, which is what I was paying just a few months ago.
On Dec 02 11:07 AM ken56 wrote:
> Diesel prices in NC 12/02/2008:
>
> $2.85 Diesel
> $1.79 reg Gas
>
> Diesel cost $1.06 more per Gallon!
Diesel fuel has had the extra .06 tax for many years. So that doesn't figure into the recent events.
In recent months the demand for gasoline and diesel fuel has decreased.
A few months ago gasoline was 3.00 per gallon and diesel fuel was 4.00 per gallon. that's That's 33 % higher.
Today gasoline is 1.67 and diesel fuel is 2.67. that's 60 % higher.
I don't believe that demands have changed that much in a few months time.
Diesel fuel has had the extra .06 tax for many years. So that doesn't figure into the recent events.
In recent months the demand for gasoline and diesel fuel have decreased world wide.
A few months ago gasoline was 3.00 per gallon and diesel fuel was 4.00 per gallon. that's That's 33 % higher.
Today gasoline is 1.67 and diesel fuel is 2.67. that's 60 % higher.
I don't believe that the demand for diesel fuel is decreasing less rapidly than gasoline when considering that manufacturing and transportation through out the world depend on diesel fuel.
gauge till its a reccession.
If gas can go fron $2 to 4, then to $1.55
diesel should be able to go back to 1.25 as in 2003
Now, if only diesel would go back to where it was priced less than regular, it would be brilliant!
it's not only possible but VERY easy to collude and fix prices . We see this every day at our Canadian gas pumps where there is NEVER any spread in prices from station to station.
Overly-big corporations make money by cornering markets, not by competing. The gas-tax argument is a red herring; in fact, if you think about it, high gas prices drain consumers spare cash from the economy, just like a government tax.
I don't believe for a moment, the arguments about evil
China and India drinking up all the oil. That may be true in 10 years, but not right now. It makes an excellent excuse to raise prices even when the world economy is shrinking and crude oil is in surplus.
Are there any trust-busters left out there ?
On Apr 29 10:34 AM User 184942 wrote:
> Back in the good old days #2 fuel (diesel or heating oil) was a leftover
> residual from the refining process. On our farm in the fifties we
> paid 9¢/gal for #2 and 28¢/gal for gasoline. Now, as Maxbird says
> up above, the refining process is a lot more sophisticated, and they
> can "reform" a heavy residual into gasoline. Some refineries can
> reform heavy fractions into benzene, or so I've been told while the
> tanker I was working on was loading at Valero's Corpus Christi refinery,
> which is very modern.
> Based on the fact that they can manipulate what product they get
> from a gallon of crude any which way, it makes sense that refined
> product will be priced based on the BTU (heat) content of the product.
> In other words, we should expect to pay about 20% more for diesel,
> because it has 20% more energy in it. This would logically be offset
> a bit by the fact that #2 is cheaper to refine, store, transport,
> insure, and is not as perishable. Offsetting the price of #2 diesel
> higher would be the relatively higher taxes, and the relative scarcity
> of low-sulfur crude and refineries that can produce low-sulfur diesel.
>
> As I understand it, the reason that diesel is taxed higher is that
> when it's used as motor fuel it is used in heavy trucks, and they
> are what do much/most of the damage to roads. Why not tax fuel by
> the BTU (or calorie, for you metricheads)? Why not make wheel taxes
> reflect the damage that heavy trucks do to roadways? Politics, I
> guess.
> In any event, the amount of #2 diesel that gets burned in cars is
> a very small slice of the pie in America.
> Having been an employee of several oil companies, I harbor no illusions
> about their capacity for venality, duplicity, and short-sighted stupidity.
> However, both crude oil and refined product are commodities that
> are sold at auction Everybody quotes the price of crude, which I
> find amusing because about one person in 5 knows how many gallons
> of oil there is in a "barrel," and so most people have no idea what
> the price actually means. And as a hint, no, 55 US gallons is not
> the answer.
> But on the market page of any big newspaper you will find the "spot"
> price of gasoline, #2 heating oil, Jet A (kerosene), and #2 diesel
> (different from heating oil because of its higher "Cetane" rating,
> which is sort of like octane rating in gasoline. Those prices are
> set by a free market auction. Many buyers and sellers take part in
> the auction, not just the vertically integrated majors like Exxon/Mobil,
> BP/ARCO, Conoco, Texaco, Shell, Elf, etc. There are also independent
> refiners like Koch, Valero, Sunoco, Hess, Occidental, and internationals
> like PetroCanada, Elf, and the sinister PDVSA, the Venezuelan state
> oil company. PDVSA leads into the refineries that are owned in crude
> producing countries.
> The likelihood of all these competing companies getting together
> to manipulate the price of product seems remote. Obviously it can
> be done with crude, as OPEC has shown. But crude comes out of the
> ground in relatively few places, while refineries, pipelines, and
> storage tanks can go anywhere.
> All of this leaves me with the conclusion that diesel fuel is high
> because of these factors:
> 1) international demand is high (China and India).
> 2) #2 can be shipped long distances (like across the Pacific Ocean),
> while gasoline is harder to store for a long time and transport long
> distances.
> 3) The dollar is down to record lows against the Euro and Pound.
> Why sell fuel for funny-money greenbacks when you can sell it for
> real money?
> That's my take on it.
> Will this turn around, and diesel return to its pump price of gasoline
> +15%? I would guess yes, if the dollar becomes a stable currency,
> not the front for an economy wracked by deficit spending. As an example,
> take a look at Canada, where the price of gasoline in Toronto last
> week was $CDN 1.19, while diesel sold for $CDN 1.23.
> Before you make a beeline for Canada to buy fuel, remember that those
> prices are PER LITER. That makes the price of diesel in Canada 1.23
> X 3.78 = $CDN4.65
>
> SEO