Read my November 20, and November 5, 2011, postings about current diesel prices. It’s bad news, it explains why prices are only going up, and how fracking of natural gas is really for fuel production.
May 3, Diesel fuel prices are higher than gas, at the pump.
In Idaho, as of May 3, most gas stations are selling Diesel for about $4.15 per gallon. The highest is $4.50 near Mountain Home. That’s way higher than gas. Most gas stations are selling gasoline around $3.65 per gallon, with the highest at $4.00 near Hailey, Idaho.
Yet Diesel futures are selling for less than gas futures on the commodities market. As of May 2, gas futures, for June delivery, were at $3.34 per gallon. Compare that to Diesel NY at $3.29, and Diesel Gulf at $3.31 per gallon.
So why is Diesel so much higher at the pump?
Many websites say it’s because Diesel must be refined to low sulfur standards. That doesn’t explain the higher price at the pump! The commodity prices paid are for already refined Diesel, so the claim that low sulfur refining is the cause doesn’t work.
Some people say it’s because Diesel is actually in higher demand than gasoline, due to industry (like trucking & airlines, “jet” fuel is actually a form of Diesel/Kerosene) and the military (possibly the biggest user of Diesel, thank the War on Terror). That might be, but normally the commodity price reflects anticipated demand.
Some journalists have asked oil executives about fuel costs, but oil executives can only talk about the price of refined fuels sold on the commodities market, not at the pump.
What about taxes? It turns out that taxes for Diesel are more than taxes for gasoline. In Idaho the average (January 2011) pump tax (combined state/federal) for Diesel is 49.4 cents per gallon. For gas, in Idaho, it’s 43.4 cents. That’s only a 6 cents per gallon difference, so that doesn’t explain the 50 cent per gallon difference in the pump price of Diesel vs gasoline ($4.15 for Diesel minus $3.65 for gas).
By the way, California has the highest tax rates in the country for Diesel at 76 cents per gallon, and gas at 66.1 cents. That’s because California has higher local and state taxes on top of the federal taxes.
So, the only conclusion I can come up with is that Diesel fuel prices, at the pump, are higher than gasoline due to higher taxes for Diesel, and maybe higher demand for Diesel (again that’s usually what drives commodity prices, before it gets to the pump). Maybe gas stations are trying to make up for their extremely slim profit margins on gas prices by jacking up the more stable Diesel prices?
Supply and Demand shoule drive the price but the economy is slow and with the war in Iraq over tso he military’s demand should have eased any pressures on supply, yet we are still paying far too much. Deisel fuel used to be no more than the price of premium gasoline. Sure taxes are higher I think that greed and opportunist brokers from Oil companies to service station owners are to blame.
Unfortunately, just because “combat operations” are claimed to be over in Iraq, it does not bring down the amount of fuel used by the U.S. Department of Defense. Aircraft still fly, and tanks still roll, if only in training. According to 2009 numbers the DoD used $13.3 billion worth of fuel. That equates to 360,000 barrels of oil per day, in 2009 dollars! The U.S. military ranks 36th among the top 35 countries in fuel usage! The U.S. Air Force is the number one user of fuel in the DoD. The jet engine, aka turbine, normally uses kerosene based fuel, but can also use diesel. I know, being a former 19k (& former 19E, 13F, 12B and C-130 Crew Chief) we use diesel in our turbine powered M1 Abrams tanks (the same diesel used in the HUMWV [humvee] and cargo trucks). The M1 gets only 1 mile per 1.6 gallons of fuel!!! We burn more than one gallon for every one mile we drive! Regarding my time in the USAF, the Air Force doesn’t measure fuel by gallons, the aircraft use so much it’s measured in pounds. The latest C-130J cargo hauler uses about 66,000 pounds of fuel to fly about 3452 miles!!! Keep that in mind when you think about all the civilian airliners flying all over the world, and you might understand why airlines are in financial trouble (& why they are afraid to pass that cost onto passengers [they haven't really been passing that cost onto customers]).
Regarding demand, in another posting I wrote how world demand is actually going up, so if there is any reduction in use by our military, demand elsewhere is making up for it. Demand on a global scale is so high, that U.S. refineries are shifting to exporting most of the fuel they make, which leaves less for us, thus keeping prices higher than we would like.
By the way, I’m old enough to remember a time when diesel fuel was half the cost of regular leaded gasoline!!! (anyone remember leaded gasoline?)
I also find it strange the the cost of diesel in Los Angeles is so much more than gasoline. Could it be the sudden consumer interest in that high mileage clean diesel passenger vehicles that are becoming more popular?
Hmmmm……
That’s what I thought, however it’s not individuals driving their VW diesel cars that’s causing the prices to go up, there just isn’t that many people driving diesel cars (and California is making sure of that by regulating diesel cars into extinction). The biggest users of diesel fuel are the military and the airline industry (most jet fuel is Kerosene, similar to Diesel). Normally, any increase in demand should show up in the commodity market price first. So why has the commodity price of diesel been lower than the commodity price of gas, and yet it’s reversed at the pump? Some analysts suggest that the price differences are regional, yet in my research it seems that across the country diesel pump prices are uniformly higher then gasoline.
I believe it is precisely because most users of petroleum based diesel fuel are companies/businesses/government; school buses, city buses, firetrucks, semi trucks, factories, airlines, and the biggest group user the military. So maybe it is the suppliers jacking up the price after it’s bought on the commodity market, because they know they have a captive audience.
I think you are right. Diesel prices are way too high and they need to go down. With me living a farm and running a semi i know the pain of filling the semi up. It takes alot of money.