Dear Dave,
Why does diesel fuel cost more than gasoline? —Don
Dear Don,
For the past 10 years I ran a company called Easiwash that manufactured and installed a pressure washing system in fast food restaurants all over the country. We had three diesel trucks pulling trailers that put on more than 100,000 miles each, every year. I had the same question and also wondered why there was such a variance in different parts of the country?
So I did a little research and found information from the U.S. Energy Information Administration (EIA). It states there are three reasons diesel fuel costs more than gasoline. The website also states that diesel prices were actually lower than gasoline prices until September 2004.
The first reason diesel costs more than gasoline is that the demand for diesel fuel increased. That required more exploration and drilling, which is an added expense for operations.
Second, is the transition to less pollution types of diesel fuels such as lower sulfur content. That increased the price of production and distribution.
And finally, the biggest price factor is the excise tax on a federal and state level per gallon. According to the EIA, the federal fuel tax on gasoline is currently $0.18 per gallon, while diesel is $0.24 per gallon. Each state has its own excise tax, as well. Pennsylvania is the highest, at $0.74 per gallon of diesel (California is $0.51) and $0.58 for gasoline (California is $0.39). Virginia is the lowest in the Lower 48 states, at $0.16 for diesel and $0.20 for gasoline.
Dave Solberg is a leading expert in the RV industry and author of the “RV Handbook” as well as the Managing Editor of the RV Repair Club.
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It costs more because oil companies can charge more for it. After all, diesel fuel is basically the sludge left over from refining gasoline with a few additives thrown in to appease environmentalists. The oil companies and politicians know they have a HUGE, captive audience of semi-truck fleets that need diesel. Gasoline demand goes up and down with the whims of the American public driving gas cars.
As a petroleum engineer we were trained to understand that diesel costs less than gasoline to manufacture. That was years ago but I see no reason for that to have changed. During that time diesel was cheaper at the pump as well, supporting what we have been taught. The pricing scheme I understand has changed to match up with the energy per unit volume of both fluids. Diesel also contains more energy than gasoline per unit volume, thus is more costly and thus contains more profit per unit volume for the taxing entities and producers.
Thanks Ray. Your assessment and reasoning of this dynamic is way better than the excuses offered by Dave.
Pa politicians are thief’s, thats why our diesel and gas are so high. Pa the state of high taxes.
I like this news letter because there are so many experts on it.
You referring to the commenters, Kelly? 😀 –Diane
Yep, some days I get good ideas from the comments and then some days I don’t know which “expert” to believe. However, usually amusing. I DO seriously enjoy your REAL expert authors – no sarcasm there.
That’s exactly what I thought you meant, Kelly. Just wanted to clarify it for our readers and writers. Have a great day. 😀 –Diane
I will try to be more precise in the future, but it is a bit scary that you could get in my head that way. lol The only thing I know about Diesel is that Rudolf invented it.
No problem, Kelly. But, yeah. Watch out ‘cuz I can read minds. 😯 Probably comes from working for attorneys and psychologists whose dictation I transcribed (50+ years) who would tell me to type what they meant, not what they said. 😆 –Diane
Got it. My Pennsylvania Dutch mom would say; “I want you to hear what I mean, not what I say.”
Hello Dave,
This is the first time I have commented on your articles, typically because I agree with you 100%. Today I want to add to your comments about fuel. I have a problem with all of the ethanol fuels. We have had this crap shoved down our throat (well! in our gas tanks) It cost more to produce gas with ethanol, and we get less gas mileage as a bonus. I use regular E-90 for both my vehicles. When pulling my 6,000 lb. Lance with my Toyota Tundra, I typically average around 11 MPG. I drive 58-60 MPH on mostly flat roads in Florida towing my Trailer. Additionally I watch my RPM gauge which gives the best performance at around 1,800 RPM. Now! here is the kicker, last year I decided to try NON-Ethanol Gas for a couple of tanks. It is hard to find but if you check with Gas Buddy, you can find stations that have it.
By the 2nd tank, I started seeing 1.5 to 2 MPG better fuel economy. The down side is, it is a wash as far as overall cost to tow my Trailer, so there is no money saved.
This is a bunch of bull {bleeped} . Diesel is cheaper to refine in gasoline the charging more for it because diesel gets better mileage than gasoline I don’t believe this stories of low sulfur this and that should be almost $2 difference in the price of gasoline and diesel diesel was always cheaper than gas in the past
Answer is less complicated than imagined. Fuel pricing is now baed on energy content, not cost of production. A gallon of diesel contains 147,000 BTU while gasoline has 125,000 BTU. In other words, diesel can do about 18% more work than gas. Thats why homes are heated, trucks powered and jets fly using diesel derived fuels. If you adjust pump prices to factor out taxes and local market profit margins, diesel costs about 18% more than gasoline. Make sense?
So how come until last month diesel in Oregon and elsewhere was 20 to 40 cents less per gallon the an 82 octane?
Bill, local market conditions can temporarily affect prices at the pump. Fluctuations are common in all commodity markets.
Your explanation, which identifies the local market, does not include the refining market. Athough diesel does contain more BTU per unit volume, it is also cheaper to refine. Hence, assuming all other cost factors being equal, the refiner’s profit margins for diesel is greater. Compared to gasoline, the industry’s recent adoption of the cost-per-BTU-content is logical until/unless one includes the refining cost. It allows the industry to not pass on the savings found in the diesel refining process. Pretty wry if you ask me.
Growing up in the 80s coal town of southwest Virginia.. There was a gas station in town that was cpt,ctf, something close to that which was produced and refined containing no oil products it was produced using coal instead of oil ..and every grade was 2 to 3 points higher than gas the fuel cost more than gas it was 91 cents .and gas was 86. Cents …the gas should roughly cost the same to produce now…even if the wanted to charge 1.50 or or more for gas would be higher octane would be cheaper than gas
If the United States 🇺🇸 makes the mistake to buy IRANIAN oil thru VENEZUELA…FOR THE NEXT 9 YEARS.as the negotiation were on the table last Saturday….Iran said. .lift my sanctions
Maduro said .make me Presidrnt no a DICTATOR….
Iran would develop nuclear capacity
Maduro will keep in torturing people. We get cheaper gas for the next 9 years.
Keep in mind all the Venezuelan refineries and Rigs..are rusted.need services and they have been closed.
How do you like them Apples?
Say again please .. In English?
it should be based on cost to manufacture plus profit. Not based on “well its cheaper but it provides more BTU’s” so lets charge more
You did not include at least two factors that cause a significant cost difference.
1. “Winter blend” which is used part of the year in the upper US, contains part Kerosene which is usually more expensive.
2. Market contention between road diesel and home heating oil causing road diesel to be more expensive in winter.
I just lost brain cells reading this. Point 3 is the only verifiable part of this. Diesel is a byproduct of oil refining for gas. Chemicals are added to the diesel to remove the sulphur. The only reason diesel is in a higher demand is directly related to the push for diesel vehicles before Hurricane Katrina (diesel cars, etc) and the refinery’s in LA/TX were shutdown due to damage. There is ZERO logical reason why diesel is higher other than money.
I’m calling BS. It is less refined which in turn means less cost. They sell for more knowing truckers, farmers, etc have to buy it to produce/move goods. They offset and make more profit on businesses vs the public knowing the outcry of the general public.
You are 100% right
It seems like diesel used to be cheaper until they started adding ethenol to gas. This essentially uses diesel in farm equipment to create more gas.
FYI, diesel commonly costs less than regular gasoline in parts of California (Furnace Creek in Death Valley is a memorable example just because of the price itself). Haven’t noticed that in other states, but I haven’t traveled in all states.
The answer is BS, exploration is for crude oil, does not matter if diesel or gasoline. In fact more diesel comes from every barrel of oil. 2 sulfur is removed in base refinery from crude oil. 3 was a fair answer. Diesel has more mmbtu per gallon. The cost to refine diesel is less and takes far less equipment to refine it.
WM – You’re spot on! When I had my first diesel pickups in the 80’s and 90’s diesel was under $1.00 and comfortably less expensive than regular gas.
Thank you. I felt the same. BS.
It’s funny, the people just say,”oh, okay”. I don’t need these emails. I’m unsubcribing. I’ve read other bs from this site before. By y’all! I’m goin campin’!
I agree!
Perfect answer, thank you
After reading these comments thank gawd there still is some common sense. Because the guy that does this article doesn’t have any
Was that first reason given by the EIA put there to insult us? I cannot believe they think we are that stupid. On the other hand, if this was an actual reason given, I can believe they are that stupid.
Diesel cost less process wise to make. The only reason it cost more is they can charge more. A large amount of diesel is used by trucks.
Diesel costs less to refine. It costs more at the pump because refiners simply charge the retailers more and the retailers in turn also take a higher margin. Some states take a higher tax on diesel at the refiner before the consumer see it at the pump. In Canada, diesel typically costs less than gasoline. Anything else you read about why it costs more than gas is BS to support their higher margins!
Isn’t diesel just a by-product of the gasoline production process?
No, apparently it comes out of a different oil well than gasoline. At least that is what is says in the article. : )
Diesel IS a byproduct of gasoline. Back somewhere around the 70’s they started offering cars with diesel motors. From that point on as the numbers grew so did the price of diesel fuel. You can’t stop greed, therefore as the demand increased so did the price. As to the shortage of fuel for cars and trucks going on, it is again greed. We are again being taken to the “cleaners” by oil producers and the middle man. Isn’t it strange that the same day the shutdown of crude oil from Russia is announced, the price skyrockets! Fifty or so years ago when the price of crude would go up it would take a few days or weeks to reach the pumps, now days it changes every day according to crude.
Petroleum refineries in the United States produce about 19 to 20 gallons of motor gasoline and 11 to 12 gallons of ultra-low sulfur distillate fuel oil (most of which is sold as diesel fuel and in several states as heating oil) from one 42-gallon barrel of crude oil.
Also cruise ships have quadrupled in the past 10 years and most use diesel instead of bunker oil because of ports requiring it.
The price differential changes day to day, at least around here. Sometimes diesel is cheaper, sometimes it’s more spendy. As I recall, back in the 60’s (or so) diesel was so cheap it almost seemed like they were ‘giving it away’. Big trucks were the only vehicles using it.
higher demand, lower pollution, and state taxes. Thank you Dave.
Back in the day, diesel was $.18/gal (yes, 18 cents), gas was $.25/gal.
Way way back…I used to pump it lol