Have The Oil Companies Artificially Inflated Diesel Prices?

The reason that diesel fuel prices are higher is inelastic demand combined with limited diesel production capacity. Since the emphasis has been on gas for so long, most refineries don't produce much diesel fuel. The oil industry prognosticators didn't anticipate many consumers using diesel, and they've been surprised by the demand. At the same time, diesel fuel is one of a few inelastic commodities in the world - over the road semis NEED diesel, regardless of cost. Therefore, there's not enough diesel to satisfy every buyer and prices raise accordingly. When U.S. refineries increase their capacity, the cost of diesel should drop. It is less expensive to refine than gasoline and it comprises a larger percentage of a typical barrel of oil than gas.

About a year ago, there were stories about diesel prices (as compared to gas) in Ohio. When gas started hanging around $3/gal, diesel shot up to that level then passed it all together.

Does it cost more to refine diesel fuel? Or is it much cheaper?

I believe it is simply one of the products of the refining process. Apparently we waste a lot of money shipping our surplus diesel fuel to Europe and they in turn ship their surplus refined gasoline over here. Once diesels become more popular in North America, these shipping costs can be avoided.

The story that they would like us to belive is that our crude (Alaskan) has way too much sulpher in it to refine economiclly , so in turn our Alaskan crude is put on the world market and we in turn by the higher quality crude .

damiko, you are correct but I advocate even higher taxes on fuel with the revenue generated going directly toward the improvement and construction of highways bridges and related infrastuctures.

Being that it costs less to refine diesel fuel my belief is that there is something sneaky going on....

I'm not sure about the cost as accountants have been known to misallocate costs in support of sneaky corporate agendas.

one reason could be that last year they had to cut the amount of sulfur in the fuel to about 10% of the old fuel

According to the DOE, the processes necessary for lowering the sulfur content only adds about 5 cents to the cost. With the kind of mileage diesel cars get, and our very limited market share we are statistically insignificant when it comes to increasing diesel consumption. I live in Chicago, on city edge, and typically get about 44 city. Top contender in our monthly mileage contest is at 70 MPG:
http://forums.tdiclub.com/showpost.php?p=2017611&postcount=1

Again, Huu76 has stepped into something he knows little about just to promote one technology over another.

The reason for the lower sulfur requirement for these new clean diesels is so that exhaust-treatment systems can be utilized to reduce exhaust emissions by up to 90% beyond that of the most clean-burning diesel autos designed in 2006. If LSD were used in these clean diesels, they would still be super clean compared to 2006 diesels, but the exhaust-treatment equipment would soon need service, because the level of sulfur would be too high and the equipment would soon be contaminated.

My car is a 2006 diesel. It emits much higher levels of PM and NOx than 2006 gas-powered cars, but less HCs, CO, and CO2 than comparable gas-powered cars and even less when I run blends of biodiesel. When ULSD became the standard, my car cleaned up only about 10% from the level of pollution emitted when I used LSD, so the fuel had little effect.

Truth is, ULSD is a requirement for the new diesels, but the fuel is not what makes the exhaust clean; it is the exhaust-treatment equipment and cleaner-burning engines that make them clean. The cleaner fuel is only the catalyst that has allowed the technology to make all this possible.

My theory is quite different than most.

Diesel fuel is closer to the true market price of what transportation fuel should cost in this country.

Gasoline, since the price of which is so politically important, is artificially driven down by government interaction and super intense competition.

Think about it. No other product in America faces the same level of competition as gasoline. Retailers are price takers, and the price is a lost leader for most, with no profit being made by any.

This is not the case for diesel fuel, since truck drivers can't afford to drive around for the best price.

Also, diesel fuel has more energy, and thus, has higher value. Cost of production has little to do with the price of anything. Transportation fuels are no different, its just that most Americans think they have a God-given right to get cheap gas

It certainly is refreshing to read a comment from someone who knows something about economics, re the entry by tundrahq. Too many people think the oil companies control prices or the government controls prices, neither of which is true. Supply and demand control prices. As demand increases prices rise and at some point demand will slow and prices will drop. Simple economics.

define "artificially"

if the price isn't real, don't pay it.

DIESEL FUEL IS CHEAPER TO MAKE THAN GASOLINE YOU GET MORE GALLONS OF DIESEL OUT OF CRUDE OIL THAN GASOLINE THIS ALL STARTED BACK IN 1979 AND 1980 WHAT HAPPENED WAS THAT A LOT OF PEOPLE STARTED BUYING DIESEL CARS SO THEN THEY JACKED UP THE DIESEL FUEL PRICE BEFORE THAT DIESEL FUEL WAS 20 CENTS CHEAPER THAN REGULAR GASOLINE.

One 65 cent per gallon difference is the Bill Clinton 65 cent diesel surchage. That boosted the price of diesel by 65 cents per gallon.

Is anyone surprised that the government earns more money from the sale of fuel than the oil companies. With the long list of taxes and surcharges - more fuel profit goes to the federal, state and county governments than goes to the oil companies.

I have not heard anyone complaining about how much money the government makes on the sale of gasoline and diesel. I guess people feel it is ok to complain about the oil companies but they don't want to speak out against the government charging high fuel taxes. At least the oil companies supply us with fuel. What does the government do with the tax money?

DIESEL FUEL IS CHEAPER TO MAKE THAN GASOLINE YOU GET MORE GALLONS OF DIESEL OUT OF CRUDE OIL THAN GASOLINE THIS ALL STARTED BACK IN 1979 AND 1980 WHAT HAPPENED WAS THAT A LOT OF PEOPLE STARTED BUYING DIESEL CARS SO THEN THEY JACKED UP THE DIESEL FUEL PRICE BEFORE THAT DIESEL FUEL WAS 20 CENTS CHEAPER THAN REGULAR GASOLINE.-TONYRICH

The first part of the post is true, but like I stated, the price of production has little to do with the market price of most products. Does anyone actually believe that cereal cost anywhere near $3 a box to produce?

The second part is absolutely ridiculous.

When did Americans start buying lots of diesel cars? The peak was in the early 80s, and today, there is only one diesel car for sale in the U.S. The total diesel fleet, including heavy, light-duty pickups, represent less than 4% of our total light-duty fleet; for cars, it is less than 1/2 of one percent. Back in the real world, there has been no shift to diesel power for transportation in this country, and the idea that some ghost entity came in and raised the price of diesel fuel for a ghost increase in demand that has never happened is ludicrous.

Over the last twenty-five years, we have become more gasoline dominant; not more diesel-fuel dominated.

Artificial means that the market doesn't determine price. The market doesn't determine the price of either gasoline or diesel fuel, because our military budgets around $50 billion per year to keep the flow of oil moving around the world, yet this cost is not reflected in the fuel market but taken from the general tax fund. The $.12 per gallon excise tax doesn't begin to pay for all our efforts to ensure the secure flow of oil and fuels around the world or federal road projects. The fuel taxes charged by each state goes to help pay for road maintenance and improvement, but even those taxes don't pay the full amount, and thus states take money out of the general fund to help improve roads.

In summary, fuel is still cheaper in this country than a true, free market would dictate. Many, however, feel that God ordained us to have cheap gas and diesel fuel, and so we make up reasons why someone is sticking it to us but all of these theories are ludicrous.

Additionally, oil producers and refiners get tax subsidies for operating in the U.S. This is also artificial. For diesel fuel, however, there is less government intervention to ensure enough is being refined to satisfy our gas-guzzling society, which means we refine more gasoline in this country than the market would bear out than would maximize revenue. With diesel fuel, we refine about the right amount to maximize revenue, which is the "market's" set supply. In other words, cheap diesel fuel doesn't get congressmen and presidents reelected, but cheap gas does!