ECONOMY
Why is there a difference in the price between gas and diesel?
Here’s how to get the best deals on fuel ahead of Memorial Day weekend.
Author: Diane Sandberg (KARE11
MINNEAPOLIS — As summer gets closer and more people get ready to hit the road for vacations, all eyes are on the price of gasoline, hoping for a break from ever-rising prices.
But drivers with diesel-fueled vehicles have been paying significantly more to fill their tanks for years, sometimes even 50 cents or more per gallon.
So why is diesel more expensive?
Prior to September 2004, diesel fuel was often lower than the price of gasoline. Since then, worldwide demand has increased. In the U.S., the transition to ultra-low-sulfur diesel (ULSD), which is better for the environment, has affected both production and distribution costs.
“Ever since the 2006 requirement to move to ultra-low sulfur diesel, there’s been a lot of expense added to refineries to be able to remove all of that sulfur,” said Patrick De Haan with GasBuddy. “And now you have a lot of requirements, that diesel essentially has had less sulfur content than even gasoline. And so a lot of that requires great expense.”
NerdWallet also cites federal taxes as a reason for higher diesel prices. Drivers pay a tax of 24.3 cents per gallon on diesel, versus 18.3 per gallon for gas.
According to the U.S. Energy Information Administration (EIA), other factors affecting the price of diesel fuel, include:
The cost of purchasing crude oil from refineries
Refining costs and profits
Costs tied to distribution, marketing and retail expenses
Federal, state, county and local taxes
Just like gasoline, the price of diesel changes based on the season. The oil used to heat homes and diesel fuel are very similar and produced at the same time. When heating oil is in greater demand during the winter months, diesel fuel also becomes more expensive.
“Gasoline prices generally are lowest in the winter when fewer Americans are driving and they start rising in the spring as demand goes up,” De Haan said. “And those more expensive blends of summer gasoline are rolled out. Diesel is a bit of the opposite.”
Weather and world events can also affect prices. Extremely hot weather – like we saw last summer – hurricanes and supply cuts from major producing countries in the Organization of the Petroleum Exporting Countries alliance (OPEC) all drive prices up.
With all these factors affecting the price at the pump, is there any hope for diesel drivers to find a good deal?
“It can be a little bit more tricky,” De Haan said. “Diesel prices don’t tend to be as volatile. But if you do have a rig or if you’re waiting to buy, I would say waiting to purchase a bulk supply of diesel into June maybe July, depending on the timing, trying to beat out hurricane season because hurricane season can have a great impact both on diesel and gasoline prices.”
De Haan said downloading a fuel-finding app or using a search engine to check the local prices is helpful. He also recommends finding a fueling station further away from a highway or interstate.
“There is a huge propensity to potentially overpay, just like there is on gasoline, that holds true with diesel as well. I’ve seen 50 to 70 cents a gallon differences between some of those travel stops on the interstate and your local gas station in town.”
So with a bit of luck and a little shopping around, diesel drivers can find a better deal on fuel this summer.
Credit: Kate 11