It was only in recent years that diesel fuel prices soared above gas prices. These two fuel categories used to have different peak seasons, with gasoline prices enjoying greater primacy in pricing over longer months. Gasoline then had the biggest gap in prices from diesel fuel during the summer months, when demand for gasoline peaked as a result of families taking long drives across states. Meanwhile, diesel fuels scored higher prices during the winter months, when the demand for distilled heating oils used at home increases as well. This is because distilled heating oil and diesel fuels are refined in the same facility using the same process, causing the demand for diesel fuel and distilled heating oil to act in a parallel manner.
The increase in the base price levels of both gasoline and diesel fuel has been primarily driven by the worldwide increase in crude oil prices. Crude oil is the basic ingredient from where different forms of fuels are derived from.
However, there are three particular reasons why the demand for diesel fuel have increased over time, the first being increasing demand, the second being the slackening demand for gasoline, and third being new environmental restrictions on gasoline.
Diesel engines can be found in nearly all semi-trucks, delivery vehicles, buses, trains, ships, boats and barges, as well as farm, construction and military vehicles and vehicles. Because of this widespread use, people have always been thinking of ways to manufacture products that are safe for the environment. Biodiesel falls under this category and is produced from vegetable oils, animal fats, or recycled restaurant grease. Its name denotes that it is biodegradable and can lessen vehicle emissions of carbon monoxide, hydrocarbons, and particulates.
In addition, the relative increase of prices of diesel fuel products have made gas prices appear much cheaper, especially with less people choosing to buy gasoline. Increasing consumption of diesel fuel has driven up its prices, whereas a near steady to decreasing consumption of gasoline has led to its price to remain stable, if not decreasing as well over time. This increases the relative price gap between the two.
The most unstable factor that affects diesel fuel is undoubtedly local marketing and distribution. Diesel fuel is in such high and constant demand that fuel stockpiles are generally pretty shallow. This means that if there is a sudden spike in fuel consumption, the warehoused supply will not be enough and this will drive the price of fuel up. Another factor is distance; consumers close to refineries tend to pay less because they avoid transportation costs. Local competition also plays an important role in regulating fuel prices.
The price at the pump also is inclusive of federal, state, and local taxes. In other states, counties, and city governments levy additional taxes. Local market conditions and other factors such as the location and the marketing strategy of the owner are reflected in the retail price as well.The components of diesel fuel prices can be broken down into the following (from highest to lowest percentage): crude oil, refining, taxes, and distribution and marketing. Knowing this information will give the consumers a clearer picture why the prices are pegged at such and why they fluctuate.And can this rising prices cause a cheap car insurance company to become cheaper?
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