Conspiracy Theory: Why Is Diesel Fuel So High?

The premium on diesel is ridiculous. It's almost $5/gal at some places.

— monkeyrun (View Profile)

Posted on 4/18/2008 4:14:23 PM | reply to this comment | Votes: 4   

Here in the northeast, diesel has consistently been 30% higher than 87 for at least a year.

I just can't see buying a diesel; the extra MPG won't offest the extra $PG. (Forgetting the fact that it's harder to find)

— sold2early (View Profile)

Posted on 4/18/2008 4:21:39 PM | reply to this comment | Votes: 3   

So, diesel vehicles use roughly 1/2 the fuel of gas vehicles.
And priced appropriately, diesel would cost almost 1/2 what gas does (there's a lot less refining of crude compared to creating gasoline, which doesn't remotely resemble the stuff coming out of the ground).

If it were priced fairly, EVERYONE would be driving a diesel.
Do the math -- 1/2 the volume at 1/2 the price == 1/4 the revenue for the oil companies. That's 75% LESS $$$$ in!

Do you think there might be an incentive for the oil companies to kill diesel sales???

— DieselRules (View Profile)

Posted on 4/18/2008 4:44:07 PM | reply to this comment | Votes: 2   

Look back no further than 2002 and see diesel was .02 less than regular. Now it commands a .60 premium.

— Agent009 (View Profile)

Posted on 4/18/2008 4:59:17 PM | reply to this comment | Votes: 3   

Well, if the main point of his "theory" is that oil co's aren't building new refineries (6th paragraph of story), then he's a moron. It's not necessarily the money to build the refinery (although expensive), but the regulations/politics/enviro-nuts that clog up the process to build one. There was an approval for a refinery in AZ, I belive, seven years ago and they still haven't built a thing.
Furthermore, on top of the production issue, there still is a larger need for regular gas all over the world than there is diesel, so resources are devoted to that. Less supply with now growing demand for diesel will drive up the price faster...especially if the cost-benefit to producers is to keep focusing on regular gas and not adjusting diesel production. Again, goes back to refining capacity.
Now, I'm sure oil producers aren't completely innocent, but it's easy to just find a "boogey-man".

— cktoo (View Profile)

Posted on 4/18/2008 5:40:15 PM | reply to this comment | Votes: 1   

Basically because if you get suckered into buying a diesel, you're stuck.

big oil can charge whatever they want. Truckers can pass along the increased costs, Joe "Euro-wannabe" has to take it in the @ass.

There are more gasoline voters than diesel voters.

— huu76 (View Profile)

Posted on 4/18/2008 6:13:54 PM | reply to this comment | Votes: 1   

nopoint141...
Big difference, gasoline/diesel is an economic issue. The typical liberal fear mongering you just spouted are social issues.

You should do a little research. In the US, the difference between gas and diesel taxes are about 1%.
http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
In Europe, most countries (not the UK, thanks Rupert) ranged from high to nearly double for gasoline.

wbradd,
Do you expect your Ford to last 500K km, let alone miles?

— huu76 (View Profile)

Posted on 4/18/2008 9:50:15 PM | reply to this comment | Votes: 0   

I think the oil companies resized that diesels such as Jetta's were cheap to run. So in order for them to make a profit off of the small displacement diesel owners the JACKED UP THE PRICE to be more expensive than gas! haha just a though

— macnei (View Profile)

Posted on 4/18/2008 9:52:58 PM | reply to this comment | Votes: 1   

It's not a conspiracy. That is the candy of fools.

I have a diesel car and know very well the pain of $4.00 a gallon when the whole point of the damn thing was to save money in the first place. At 40mpg I am at equal with our other gas powered car that gets 33 mpg.

The reason diesel is high is two fold.

1) The government mandated a new low-sulfur blend recently that is more expensive to make, and at this time has less refining capacity as a commodity because different regions require different blends. So it is not as eay to distribute either. The cost to re-engineer the existing refineries has made its way into the fuel.

Blame the government for meddling with the fuel and not allowing new refineries, not oil companies.

2) Diesel is high for the same reason gas is high. Demand worldwide for oil is up, and supply has not changed. New oil exploration is black balled by increasingly lefty governments. Refining capacity has not changed in 30 years because enviro-nazis wont allow new plants to be built anywhere.

China and India are exploding with growth, which means they are competing with the USA on the world oil market. What happens when you have more buyers but the same supply? Higher prices. Economics 101.

Blame inhibitive environmentalists - rebels without a clue.

— SteedPub (View Profile)

Posted on 4/18/2008 11:59:05 PM | reply to this comment | Votes: 4   

SteedPub,

Bare with me here, as I am paraphrasing from memory but could find and site exact information if necessary.

I recently read (in one of my Forbes, Fortunes, Business Week publishments) that gas sales in the US where at the lowest in the 1st quarter of this year than they had been in some 6-8 years.

This is despite the Econ. 101 reference that you site, as there is also the largest surplus of gasoline reserves sitting on the sidelines within the same time span. Meanwhile gas prices have continued their typical increasing flux as we roll into summer months, typically justified by the higher demand as families take their road trip vacations etc. Accompanied by whatever story they decide to tell us for that particular summer season that justifies why they just can't keep up with the demand. Therefore, Econ. 101, they just have to increase gas prices, due to supply and demand.

This year however, the facts are in stark contrast to the typical song they sing and yet they’re taking the same action despite them running contrary to Econ. 101 supply and demand principals.

The facts are that demand is at its lowest in almost a decade and supply is at the highest, as is the cost of gasoline at the pump. All of which are contrary to the laws of supply and demand.

TooLateToRace,

Why don’t WE poke a few holes in our own ground? The US sits on some of the largest Oil Reserves in the world, if not the largest. Although it is not widely known, despite Alaska being one of the largest. There is more shell oil underneath the mountains of Colorado, Wyoming, Montana and Utah than in all of the oil reserves in the Middle East combined. Until recently, the cost of extracting shell oil from the ground and refining it was cost prohibitive, though now there are multiple technologies that would allow for such, and bring the cost per barrel in well below the $100 mark that we are paying to buy it from elsewhere in the world. Primarily, from the countries who are funding Religious fundamentalist groups that wish for us to disappear from the planet at their earliest convenience.

For years, our government has known of these reserves, as they had claimed and have held ownership of these lands since they earlier part of this century. Supposedly holding on to our reserves until it was absolutely necessary to tap them, as well as stating cost as a primary reason for not doing so. Well, as cost is no longer and issue, and the resulting economic job explosion and stimulus that would result from tapping, cleanly refining, and providing inexpensive fuel to our own citizens should be reason enough incentive to now poke our own holes in the our own ground. In addition, we would be able to under price and sell the surplus off onto the global markets, becoming the new middle east of fuel supply to the world. Denver could quite literally be the new Dubai!

But, we would rather continue to buy at a ridiculous price point the oil of other countries, gougi

— VegasAutoPhile (View Profile)

Posted on 4/19/2008 12:02:06 PM | reply to this comment | Votes: 2   

Oops, I guess I carried on a bit to long and was cut off, here are the final few comments that didn't fit into the first post.

But, we would rather continue to buy at a ridiculous price point the oil of other countries, gouging our citizenship at the pump. At least until the environment has become so damaged by fossil fuels that alternative fuels are an absolute necessity for the survival of the planet (pretty much right about now). Then all of the oil we have been sitting on for decades will be a moot point, and therefore worthless to us.

But at least the money/market makers where able to extort us for a good long run. And, incase you didn’t know, that is in fact what is most important.

Sorry everyone, I did not mean for what was intended to be a brief comment to turn into a rant. Just thought a couple of counter points that needed to be interjected.

— VegasAutoPhile (View Profile)

Posted on 4/19/2008 12:06:35 PM | reply to this comment | Votes: 2   

VegasAutophile , some time ago I took a trip out west to see the mountains and I did see some oil wells in Wyoming that were active . Another interesting point was that I saw rows of used oil wheel pumping equipment that was sitting kind of abandoned or taken out of service and kind of arranged like a used car lot .This was back in the mid 90's . I did not talk to any of the locals however . So, there is some activity going on around there. On another point , it was not too long ago that Russia found all their oil reserves and is awash in cash . Now if Japan could find some , they would have something to smile about rather that working themselves to death . You had a quite a few good points in your posting . Very good writing . Better than some of the other anger ridden post as of late by others

— toolatetorace (View Profile)

Posted on 4/19/2008 3:06:33 PM | reply to this comment | Votes: 3   

TooLateToRace, thank you for the compliment, and you make a very good point as well. Using Russia to illustrate what those of us (throughout the rest of the world, US, Asia etc) could do to become self-sufficient. Not only from an energy perspective, but considering all of the economic ripple effects associated with breaking away from continued dependance on foreign oil. As a result they are enjoying economic stimulus and re-stabilization from the shear down fall and poverty they where experiencing not all that long ago.

Back to original main topic, it is that much more shameful that just as we as a nation are finally awakening and realizing the benefits of switching to diesel and other more efficient technologies. As well as the manufacturers making leaps and bounds in their diesel engine technologies(there where multiple articles this week alone on Autospies to that affect). Big oil makes a push to increase the cost of diesel to de-incentivize the US populous from converting. By making diesel cost inhibitive for the consumer they are in effect negating any potential for savings due to cleaner and more efficient diesel fuel and engine technologies.

— VegasAutoPhile (View Profile)

Posted on 4/19/2008 5:03:42 PM | reply to this comment | Votes: 2   

VegasAutoPhile..

You analysis of the US reserves that could very well be larger than the whole middle east is right on the ball. I read an analysis some time ago which explained this and that was way before crude oil hit 100USD per barrel. The economics of exxtracting USA's own reserves is now viable since current crude has hit the 100 dollar mark..

— mpls (View Profile)

Posted on 4/19/2008 6:58:49 PM | reply to this comment | Votes: 3   

Thanks mpls, like I said it's a shame that we don't one, harvest our own oil reserves rather than buy from foreign suppliers. Two, utilize it to produce primarily diesel vs. gas to capitalize on the latest clean burning, highly efficient(more MPG), and even more powerful(more performance) diesel engine technologies.

So it could be a win, win, win, win, win!!!!!!!!!! Lower fuel cost for the consumers, better/cleaner burning for the environment, better efficiency (compounded upon the less expensive fuel), and increased performance from the new diesel engine technologies(for those of us enthusiasts that
would love to have it all without sacrificing power). And lastly, the ripple effects of our self sufficiency in the arena of energy.

Maybe someone should ask our presidential candidates to read this thread? LOL

As if that would accomplish anything!

— VegasAutoPhile (View Profile)

Posted on 4/19/2008 7:44:44 PM | reply to this comment | Votes: 1   

Bravo to everyone who has posted before me! It's been a long time since I've seen so many thoughtful comments made debating a subject, most especially since there haven't been any mindless comments by fanboys.

Anyway, I want to toss out a few thoughts for everyone to think about. I don't want to rant or sound like I know what the hell I'm talking about, so forgive me if anything appears offensive:

1) Outside of light-duty trucks, why haven't the "Big 3" put forth any effort to offer diesel engine options for their passenger and sport-ute vehicles in the U.S., especially when subsidiaries of Ford and GM offer them?

2) Why has GM and the U.S. government invested so heavily in corn-based E85 when they knew the negative financial (for the consumer; exsisting diesel technologies) and environmental impact (deforestation of the Amazon Rainforest for the purpose corn and soybean farming), as well as wasting produce that should be used for humanitarian purposes?

3) If the uninformed of America can be easily manipulated by the "machine" into thinking hybrids or E85 are better for the environment, why can't the same be done to show the benefits of diesels? Wouldn't the financial gain be the same when all is said and done?

— Bored (View Profile)

Posted on 4/19/2008 9:31:20 PM | reply to this comment | Votes: 3   

VegasAutpoPhile,

I could not agree more that poking some new holes in the ground and ignoring the chicken littles for a while and opening up some new refining capacity would be the best possible thing we could do in the short term for our energy needs as well as our independence. It is the simplest, fastest, and cheapest way out of our conundrum. But we all know why that has not happened and it isn't a physical barrier.

Secondly, to your first question regarding reserves vs demand and why prices haven't leveled off or dropped it is simple. Worldwide demand is still increasing, and oil is still at 100 a barrel regardless of what is happening Stateside. Volatility in the market due to wildcards like Hugo Chavez, Iran and other hotspots has kept the world oil market price up.

— SteedPub (View Profile)

Posted on 4/19/2008 10:13:00 PM | reply to this comment | Votes: 2   

Bored,

You made three very good points, and I would hope that no offense disclaimer should be necessary. As I for one, was certainly not offended by any of them.

Steedpub,

Your supply and demand counter point is valid as well. It seems that we (in the US) are accustomed to being the center of the world economy, especially having always been the largest purchaser and user of oil. Thus, it is hard to accept that we could now be on the opposite side of the Micro/Macro scale. As our market is no longer the largest segment of the global demand side of the equation, and therefore not the largest contributor to determining fuel prices.

So even though the US market demand is down, supply reserves are at a surplus, prices are remaining high due to the international price per barrel caused by global demand and hedging against volatility(Chavez, Iran etc).

A bitter pill for the pocketbook, although the majority of the world has been(in this position their whole lives)paying a premium for fuel due to high demand/low supply as we where the worlds largest oil consuming nation.

Ironically, it is only now that we are on the other side of the stick, experiencing what we have been unintentionally(unconsciously) imposing on the rest of the world. That we are now(in any large numbers)truly beginning to squeal about the energy crisis and scream for clean, more efficient, less expensive fuels and engine technologies.

Certainly not ideal, but if the vast majority of us do awaken to this and begin to squeal loud enough, perhaps something might actually change for the better of the economy and the environment.

— VegasAutoPhile (View Profile)

Posted on 4/20/2008 11:01:31 AM | reply to this comment | Votes: 1   

Bored..

You bring up 2 points I would like to comment on..
E85, this I think is a red herring, more energy is needed extract the same amount of energy from E85 based fuel tan from traditionla fossil fuel.. The other ecomonics is taking away land that should be used for growing food for humans.. Already India and Thailand and other places of rice growing nations have stopped exporting this year due to bad harvest last year.. rice prices have shot up and will continue to shoot up in the forseeabnle future until griwers and exporters see better harvests this year..


Hybrids, i disagree with your comments, I think Hybrids can and do play their part.. since apart from Petrol/Gasoline hybrid, several car compamniee will release diesel hybrids..

— mpls (View Profile)

Posted on 4/20/2008 1:59:06 PM | reply to this comment | Votes: 1   

why is diesel fuel what so high? temperature? grade? quality? purchasers? prices?

the title isn't even properly descriptive and would read better as, "why is diesel fuel pricing is high?"

— minimalist (View Profile)

Posted on 4/21/2008 5:33:39 PM | reply to this comment | Votes: 1   

edit:

"why is diesel fuel pricing so high."

— minimalist (View Profile)

Posted on 4/21/2008 5:34:51 PM | reply to this comment | Votes: 1   

According to the EEIA, world-wide demand for diesel fuel is up as diesel cars have become more popular in Europe (53%), India, and China and growing economies require more diesel fuel to move product. Gasoline demand is down, but refiners have to produce a certain percentage of gasoline when they hydro-crack crude. They've been sending the unwanted gasoline to the U.S. where demand is higher, but this season, gasoline demand is down due to the high price (compared to last year). Diesel demand has been somewhat flat, because we must use diesel to move our economy so trucking fleets have not been able to reduce their usage as have drivers of personal vehicles.

The result: Those in the gasoline industry are not making money. High oil prices and too much supply leave them as price takers for a fuel that cost as much to make as they can get for it. Diesel fuel, on the other hand, is about where it should be considering $116 crude price.

Diesel is not too high, but rather, gasoline is to cheap considering the price of crude. One can prove this by looking at gas prices last year versus the crude price and see the difference in margin. There is no margin this year. Diesel, on the other hand, has moved up about the same percentage, relative to the price of crude.

There is no conspiracy. There is no one organization (not even Saudi Arabia) that could accomplish such a conspiracy even if they wanted to.

End result: Refiners will find a way to quit making so much gasoline (where they are making no profit) and start supplying more diesel fuel (where they can make a profit). Eventually, this free-market force will stabilize both fuels to their natural state (diesel fuel at about a $.30 premium to regular unleaded).

— gregsfc (View Profile)

Posted on 4/26/2008 8:16:14 AM | reply to this comment | Votes: 1