Friday, March 28, 2008

WHY ARE DIESEL PRICES OUT THE ROOF?

I’m answering another good question asked by Lisa, LIFE ON A BISON FARM.  She wanted to know why diesel fuel was so much more expensive than gasoline, when diesel was traditionally much cheaper.  Where Lisa lives, diesel fuel is $4.35 a gallon.  It may be more than that by now as she mentioned that it was going up almost daily. Thanks for your question, Lisa!  I think first I’ll give the “official” reasons why, then what I think is the real reason.  There is a difference many times!

 

One reason prices are so high on diesel fuel are pollution laws that went into effect in 2006.  Diesel fuel was required to have a much lower content of sulfur than previously.  Anytime you have environmental regulations change the formulation of any type of fuel, it’s going to cost you.  That’s part of the reason why gasoline prices are high, but of course not entirely.  Getting back to the diesel fuel, this requirement doesn’t come without cost.  As usual, the fuel mileage is lower.  Many trucking companies ordered entire fleets of new trucks to beat the engine redesign deadline that reduced the fuel economy.  Existing diesel engines can burn what’s called the Ultra Low Sulfur Diesel (ULSD).  However, there may be some diesel owners that may experience a problem with it.  According to a TECHNICAL BULLETIN from Chevron, the ULSD causes elastomers (O-rings) to shrink.  The most common problem from this is fuel pump leakage.  It is especially true for engines older than ten years, but it has occurred in new engines too.

 

Another reported cause were the hurricanes in the Gulf of Mexico disrupting production and refining.  In an ARTICLE in Edmunds, a part of the reason for the more recent price increases are hurricanes in the Gulf of Mexico.  When the refineries came back on-line, they produced mostly gasoline which was in more demand.  Another cause was winter.  The demand for heating oil went up resulting in a price increase in diesel.  One factor that no one hears much about is an increased demand for diesel fuel in Europe.  In some European countries, more than half of the vehicles on the road are diesel powered.

 

The list of reasons for the high cost of diesel goes on and on.  But here is my observation.  Ever since the so-called gasoline shortage of the early 1970’s (there was no shortage, it was contrived by the oil companies just to drive the price up, but that’s another story), diesel powered vehicles gained in popularity.  The fuel at the time was much cheaper than gasoline, and diesel engines were considerably more fuel efficient than their gasoline counterparts.  One example was the 1980-81 Pontiac Bonneville.   There was a 350 c.i. diesel engine available. The VW Rabbit  also had a diesel option.  And then there’s always been the diesel Mercedes . My point is that when the oil companies purposely spiked gas prices, people started turning to the much cheaper and more fuel efficient diesel.  That’s when diesel prices started climbing.  The cost didn’t jump like it has in recent months, but nevertheless it rose.  I believe the oil companies increased the price so they would stop “losing money.” I think this is the major reason why diesel has gone up so much recently.  There are a lot of diesel pickup trucks out there andI read in EDMUNDS INSIDE LINE that Mercedes is planning to introduce a diesel SUV, the 2009 GL320 Bluetec. Even though diesel vehicles only account for between two to three percent of the total vehicles in the U.S. (Popular Science, DIESEL REVISITED, January 29, 2002), the fact that the carmakers are considering reintroducing diesel models on a more widespread basis would be enough for a “pre-emptive strike” by the oil companies.  I think my point was made in the Edmunds article I referenced above, the author, Steven Cole Smith, asked a friend of his that was in the petroleum business why they charge so much for diesel.  His answer?  “Because we can.”  Enough said. 

 

 

10 comments:

peytonswater said...

I know that there are other means of fuel n the works. What really bothers me is everything we can and DO in space, yet we can't take more time to focus on other ways to fuel cars. NOW is the time....NO NO,,,the past was the time.  ONe day, my butt is gonna be riding in a solar car.  Good for enviornment, good for my pocketbook

hugsdoodlewacky said...

((((((((((((HUGSTOYOU))))))))))))))))))))Have a nice Sat.

wwfbison said...

Well I think your last sentence just about sums it up...be it diesel or other fuels.  I know that the popularity of diesels has exploded in our area.  The dealers can't keep them in stock and are offering top dollar for used ones.  You"ve cleared up the Low Sulfar issue, i see that on the gas pumps and the warning about using it in models after or before a certain year.  I really hope one day there will be alternative fuels we can use ~ of course someone always has to make money so maybe they will be just as expensive.  Thanks for taking the time to research this and let us know.  You should be an investigative reporter!
Lisa

jckfrstross said...

its a shame that the big wigs fill their pockets with my money for gas and no one has the guts to say ENOUGH!!!! thank you for letting me vent Dirk. Praying for you and Nelisha

Deb

schoolgal040 said...

Hi Dirk~
Great job on the research. I'm so impressed! Hubby used to have a the big diesel Ford 350, 4 door big ass truck. I was actually glad when we got rid of it. It was huge! And I can remember how much cheaper his gas was. This was about 8 years ago. How thing have changed.

Huggers,
Gayla

wipforever said...

Thanks for explaining this, Dirk.  I too wondered why diesel was suddenly so much more expensive than gas.  What a mess we're in with oil and the economy.

Sheila

moondawghouse said...

ALL fuel is high, for the reasons you mentioned. But diesel stays up there all the time, because the demand for it is steady all year, because of the trucking industry. Virtually all heavy trucks are diesel-powered and since we run all year long, the demand never drops a lot at all.

Larry

bhbner2him said...

It seems like they would be working against themselves to spike the price right before new dsl model vehicles came out; like that would drive consumers to opt for a high mpg gasoline engine instead.  Bug (my 8 year old) thinks everyone should ride a bike every where they can.  But unfortunately her plan wouldn't make much difference for us.  I can't bike a 67 mile round trip to work each day.  Nor a 20 mile round trip to the grocery store.  And the 2 mile trip to the feedstore would be kinda useless....how does one pack 50# bags of feed on a bike?!  Would work for visiting neighbors or going the one mile to church on a pretty day.  ;o)  -  Barbara

queeniemart said...

Rick is on a mission in our life to have different kinds of cars before we die..we have never owned a minivan and he wants one....ok, our kids are grown or almost grown so why do we need a minivan..along those lines, he loves diesel cars.....and would like one. Well that was before this latest life changing fiasco in the US of the high gas prices. How does the politicians think the AVERAGE worker can afford food and GAS? We can not. I like how you explain about this diesel stuff.
lisa

jt44mag said...

  EXACTLY.....!!!!...because they can........j.t....just more greedy scum that control another supposedly regulated industry....only regulations are the ones developed to help serarate us from our hardearned paychecks...oh..and  those too are coincidently getting smaller ..just as prices are rising ....j.t...