Why Is Diesel More Expensive Than Gasoline?
Whether you’re running a business or a family, you’ve got to keep an eye on the budget. When your expenses go up, you notice. Historically, people considered diesel a less expensive option to gasoline, but that hasn’t been the case for years. Let’s take a look at why.
Diesel Costs More Than Gasoline
According to the U.S. Energy Information Administration, gallon for gallon, on-road diesel has cost more than regular-grade gasoline almost continuously since late 2004. Prior to that diesel tended to cost less than gasoline unless it was wintertime.
The higher cost of on-road diesel versus gasoline is due to three main factors: cleaner diesel blends, higher state and federal taxes, and increased demand.
Cleaner Diesel Blends
A few years ago, the EPA (Environmental Protection Agency) began to limit the sulfur content of diesel fuel. This was done to decrease toxic emissions, as airborne sulfur matter is highly toxic. Due to the EPA’s rules and regulations, the diesel fuels found in the U.S. have a lower sulfur content and are less polluting. However, there was an associated increase in the costs to produce and distribute the lower sulfur diesel fuel. Additionally, diesel with a lower sulfur content has a lower energy density. That means lower sulfur diesel is capable of less fuel economy than diesel with a higher sulfur content. The combination of the rise in production and distribution costs on top of the lower energy density of low sulfur diesel factors into its higher price.
Higher State & Federal Taxes
The federal government applies taxes to the sale of on-road diesel fuel that are higher than the taxes applied to the sale of gasoline. Each state also imposes its own taxes on the sale of on-road diesel fuel. On average, the state tax applied to on-road diesel is at least 7 cents per gallon higher than the state tax imposed on the sale of gasoline. The precise difference depends on the state you live in.
Supply and demand are introductory economic principles. Each can have a noticeable effect on the price of anything. Whether you’re talking about eggs, houses, or concert tickets, whenever supply decreases, prices tend to increase. That’s largely because when a resource is in limited supply, customers are willing to pay more for it. Similarly, when demand increases, prices also tend to increase. For an example of this, just consider the cost of flowers and chocolates around Valentine’s Day versus the rest of the year. When there is a greater demand for a resource, its perceived value and therefore its cost increases. And if supply decreases while demand is increasing, prices can skyrocket.
Over the past few years, the domestic and international demand for diesel fuel has increased. Furthermore, diesel is not produced in the same quantity as gasoline. For every barrel of crude oil that’s refined, roughly half as much diesel is produced as compared to gasoline. That means diesel is always in lesser supply compared to gasoline.
Your On/Off-Road Diesel Supplier
If you have a business in or near Sullivan County, you can count on Black Bear Fuel Oil, Plumbing, Heating & Air Conditioning for all your diesel delivery needs. We’ve got you covered whether you need on-road diesel, off-road diesel, or both. We’ll deliver the best product with efficiency. And our diesel fuel is fairly priced.
Call the Bear, We’ll Be There!
You can trust Black Bear Fuel Oil to deliver for you in northern Orange County, Sullivan County, and eastern Ulster County. And you can count on our team to provide professional service with a personal touch.
Experience the Black Bear difference for yourself. Contact us today to learn more about our commercial fuel services or to request a quote.