As the price of crude oil has plummeted, fuel prices have followed, but the price of diesel has not fallen nearly as far as gasoline, federal and private-industry data show.
The numbers are telling.
On June 23, a barrel of light sweet U.S. crude oil was trading at $106.17 a barrel, according to the federal Energy Information Administration. That was right around its peak for the year. Crude has since fallen to around $69 a barrel, a drop of 35 percent.
Meanwhile, a gallon of regular gasoline in the U.S. was selling, on average, for $3.64 as of June 23, according to the EIA. As of Wednesday, auto-travel organization AAA had the average U.S. price at $2.75 per gallon, a drop of 24 percent.
On June 23, diesel was selling at $3.92 a gallon. But as of Wednesday, the average price had fallen to $3.56, according to AAA, a drop of 9 percent.
So why the difference?
“That’s a really good question,” said DuWayne Marshall, an independent trucker. “The retail price (of diesel) is staying high.”
People who run a lot of diesel equipment have been watching the situation carefully.
“Everything that we run around here is diesel,” said Tom Kruepke, President of Kruepke Trucking in Jackson. “Diesel is starting to fall now, but it has taken a lot longer to fall than it has for gasoline.”
The company runs 40 semi-tractors and 16 dump trucks, Kruepke said.
The price difference has not been lost on petroleum-markets experts.
“The past week or so, the spread between regular gasoline and diesel has been pushing out toward a dollar a gallon, which is huge,” said Jim Ritterbusch, President of Ritterbusch & Associates, an oil trading and advisory firm in Chicago.
The difference on Wednesday stood at 81 cents a gallon, according to the Daily Fuel Gauge report from AAA.
Still, the price of diesel has fallen 29 cents a gallon from where it was a year ago, according to AAA. But the price of regular gasoline has fallen 51.7 cents a gallon during the same period.
Part of the difference is the federal tax on diesel fuel is 6 cents more per gallon than gasoline — 24.4 cents vs. 18.4 cents — according to The Association For Convenience & Fuel Retailing, an Alexandria, Va.-based trade association.
Another factor is related to changing world fuel demand, including the fact that the U.S. gasoline-powered automotive fleet is becoming much more fuel efficient, Ritterbusch said.
That has led to flat year-over-year growth in demand for gasoline in the U.S., which had driven prices down. The same can’t be said about diesel.
“This year, demand within the U.S. for diesel has been much stronger than for gasoline,” Ritterbusch said. That’s partially due to the U.S. economy’s growth and “the increased truck traffic that goes along with that.”
Companies that use a lot of diesel have seen a positive effect of overall lower crude-oil prices.
“As the fuel goes down, the fuel surcharge goes down, so the savings get passed on to customers,” Kruepke said.
Marshall said he buys 200 to 230 gallons of diesel each time he fills up his semi-tractor, so any drop in the price adds up.
Marshall added that he understands, somewhat, why diesel and gasoline prices do not move in tandem.
“The old timers all claim that diesel fuel is a byproduct of making gasoline,” Marshall said. “The reality is diesel is its own commodity now. It’s grown in popularity, with emerging economies using trucks and tractors and Caterpillars and burning up diesel fuel.”
Another piece of the diesel puzzle is somewhat ironic: The resurgent U.S. oil industry is using a lot of equipment that runs on diesel to pull crude out of shale formations.
“Keep in mind, also, that diesel is the fuel that really has been behind much of the surge and the rise in domestic oil production,” said Patrick DeHaan, a petroleum-market analyst at gasbuddy.com. “In areas of North Dakota, you’re having generators run 24 hours a day on diesel.”
Any discussion of diesel prices also has to factor in global demand. The U.S. exports nearly a third of the diesel it produces to countries where diesel is the dominant fuel.
And, U.S. refineries are built to produce gasoline, which remains the overwhelmingly dominant transportation fuel source in this country, the world’s largest consumer of oil.
From each barrel of oil, U.S. refineries produce 18 to 21 gallons of gasoline and 10 to 12 gallons of diesel fuel, on average, according to the convenience and fuel retailing association.
“Refinery yields can be somewhat tweaked, but to produce significantly more (diesel) would require significant upgrades costing billions of dollars,” the association says on its website.
Yet another factor is that home heating oil and diesel, categorized as distillate fuel in the refining process, are essentially the same. Cold weather and heavy snow arriving earlier than usual in the U.S. has led to an increase in demand for home heating oil.
A late harvest has also contributed to an increase in diesel demand.
“Farmers in the Midwest have been busy harvesting, and their equipment gulps diesel fuel,” DeHaan said.