It is understandable why many interpret diesel to be cheaper than gas because of less refinement. But prices tell a different story. So, the question arises here. Why is diesel more expensive than gas, even though it requires less refining than gasoline?
Various factors cause these differences between diesel and gasoline prices. You must understand these price variations between diesel vs gas prices to plan future fuel purchases accordingly. These include complex refining processes for diesel, higher demand, and massive tax rates at the country and state levels.
Let’s explain things in detail for a better understanding:
What’s the Difference Between Diesel and Gas?
Gasoline and diesel are petroleum products, composed of hydrocarbons. Although both are made from crude oil, their chemical compositions and applications differ.
The hydrocarbon range in gasoline is lower than diesel. Gasoline molecules are smaller and burn quickly in regular cars and light-duty vehicles. On the other hand, diesel fuel has a higher hydrocarbon range and more energy content per gallon, which makes it suitable for heavy-duty engines.
Why Does Diesel Cost More Than Gasoline?
Diesel is more costly than gas, which leaves many people wondering why. The answer lies in a few key factors that affect diesel fuel prices. Below are four main reasons behind this price gap:
● Higher Taxes on Diesel
The tax on diesel at the federal level is 24.3 cents per gallon, but it is just 18.3 cents per gallon for gasoline. High tax rates at the state level also increase the fuel costs. On average, 34.76 cents are levied on diesel and 32.61 cents per gallon of gasoline at the state level. The government charges more tax on diesel fuel to collect money for road repairs because heavy diesel vehicles cause more wear on roads.
● Global Demand for Diesel
Agriculture, transportation, and construction industries require diesel in large amounts. But it’s produced at a lower rate compared to gasoline. Only 11 to 12 gallons of diesel are produced from every barrel of crude oil, whereas 19 to 20 gallons of gasoline are produced. So, this lower supply and high global demand make diesel more expensive.
● Production and Refining Costs
In 2006, the U.S. introduced strict regulations about diesel fuel. These regulations emphasized the production of ultra-low sulfur diesel (ULSD) that contains only 15 parts per million (ppm) of sulfur. To meet environmental rules, refineries must remove sulfur from diesel. This takes extra steps during refining that cost more money. That’s why diesel became more expensive to make.
● Seasonal Price Variations
Diesel prices increase during the winter months. The primary reason for increased diesel costs in winter is its connection to home heating oil. Diesel and heating oil are refined from the same section of crude oil. So, when its demand increases in cold weather, the supply of diesel gets affected. Moreover, it becomes difficult to transport fuel in harsh winter conditions. That is why the supply of diesel fuel decreases and its price increases.
How Emission Standards Influence Diesel Prices
As we have discussed that the U.S. has tightened fuel regulations from 2006 onward due to environmental safety concerns. They have made it compulsory for every refinery to produce low-sulfur diesel. The environmental protection authorities have banned high-sulfur fuel due to its negative impacts on the atmosphere.
Diesel fuel containing high sulfur content releases harmful oxides like sulfur dioxide. These gases can cause breathing problems and result in acid rain. Many refineries have spent millions to upgrade their equipment for this purpose. These massive investments by the refineries helped them produce diesel that is better for the environment. However, it has also increased the diesel fuel prices.
Does Diesel’s Efficiency Offset Its Cost?
Diesel engines produce more power per gallon of fuel than gasoline engines. The higher mass density of diesel fuel enables the diesel engines to give better fuel economy. As a result, diesel vehicles cover more distance than gasoline vehicles, which offsets its purchasing cost.
Besides that, diesel engines are durable and last longer than gasoline engines. That’s why they require fewer repairs and replacements. For example, long-haul truckers use diesel due to the higher energy density and better combustion efficiency of diesel fuel.
Supply and Demand Challenges for Diesel
Supply and demand challenges are also crucial issues that affect fuel prices. Civil or interstate wars, trade sanctions, and political conflicts can limit the fuel supply in the market. Other than these, refinery shutdowns and maintenance breaks can also decrease the fuel supply and increase prices.
In 2020, the International Maritime Organization (IMO) insisted that ships must use a cleaner fuel called very low sulfur fuel oil (VLSFO). To produce VLSFO, refiners had to use distillate components that are also needed for making diesel. This reduced the amount of diesel available and led to higher prices.
The war between Russia and Ukraine worsened this situation further in 2022. As a result of this conflict, the U.S. imposed a ban on imports of Russian oil and diesel. This decision cut off a large portion of the crude oil supply because Russia is one of the top oil producers in the world. Consequently, the gasoline and diesel prices skyrocketed.
Diesel vs. Gas Price Differences Across Countries
If you have ever searched for “gas prices around me,” you’ve likely noticed that fuel costs vary between countries and even states. This discrepancy occurs due to multiple factors, including taxation, subsidies, and environmental policies.
Diesel and gas prices vary across the U.S., Europe, and other regions due to taxes and government policies. In the U.S., diesel is more expensive because of the high tax rates to recover road maintenance costs.
Conversely, in some European countries like Belgium and Malta, the tax rate on diesel is higher than that on gasoline. The average tax on gasoline in the EU is €0.548 per liter, while on diesel it’s €0.445 per liter. Low tax is imposed on diesel to support the freight and transportation industries. Moreover, some oil-rich countries also provide subsidies on fuel to support local industries and maintain political or economic stability.
Key Takeaways
Higher tax rates, growing demand, production costs, and strict environmental rules make diesel fuel more expensive than gas. Despite being costly, diesel is still crucial for industries like trucking, farming, and shipping because it’s more efficient and powerful. These factors help explain why diesel costs more, but it remains an important fuel for many sectors.
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FAQs
Do you actually save money with diesel?
Diesel offers better fuel efficiency than gasoline, and that is a direct benefit of diesel over gasoline. Other than this, diesel engines are durable and sturdy and do not get worn out easily. It helps reduce the engine maintenance costs.
Is diesel a byproduct of making gasoline?
No, diesel is not a byproduct of making gasoline. Both of these fuels are separated at different temperature ranges during the refining process of crude oil. Diesel is separated earlier than gas because it has a dense hydrocarbon mixture.
Is it cheaper to run gas or diesel?
The initial buying costs of diesel vehicles are higher than gasoline cars because of the large and complex engine structure. Moreover, diesel fuel is also costlier than gas due to increased demand and higher tax rates. But if we examine the mileage and maintenance expenses of both vehicles, diesel trucks are comparatively cost-efficient.
Why did diesel prices just skyrocket?
There are various factors that make diesel more costly. One of those reasons is the global supply shortage due to the increasing demand for diesel in industries like shipping, farming, and marine vessels. Other than this, higher taxes on diesel fuel per gallon at the country and state levels also add to the diesel prices.
Why isn’t diesel going down?
Diesel fuel remains expensive due to rising demand across various industries and companies. The high demand for diesel fuel puts pressure on the supply. Besides that, diesel is taxed at higher rates due to its use in heavier vehicles that cause more wear and tear on roads. So, these factors combined make the diesel fuel costly, and it may remain expensive until these factors change.
Does diesel get more MPG?
Yes, diesel gets more miles per gallon (MPG) than gasoline due to the high energy content and combustion efficiency. A diesel car gets around 70 miles per gallon, whereas a similar petrol car only travels about 50 miles per gallon.
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