Why are diesel fuel prices higher than gasoline prices?
Until several years ago, the average price of diesel fuel was usually lower than the average price of gasoline. In some winters when the demand for distillate heating oil was high, the price of diesel fuel rose above the gasoline price. Since September 2004, the price of diesel fuel has been generally higher than the price of regular gasoline all year round for several reasons. Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe, and the U.S., putting more pressure on the tight global refining capacity. In the U.S., the transition to low-sulfur diesel fuel has affected diesel fuel production and distribution costs. Also, the Federal excise tax on diesel fuel is 6 cents higher per gallon (24.4 cents per gallon) than the tax on gasoline.
Good info ddreisbach ... the sad part is that many on here will simply ignore this and continue to complain about the big oil companies.
Speaking of the big oil companies, it's about time for my quarterly dividend! Woohoo!
Bob & Jamie
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kaydeejay wrote: Let's not forget Exxon's FIFTY BILLION DOLLAR PROFIT in 2007!!!
Actually, it was only $40.6 billion. And it's not like it's illegal or immoral. How about a little perspective:
- Their profit margin (net income as a percent of sales) was 11.2% which is about the same as McDonald's and less than half of Bank of America's profit margins.
- They are a HUGE company with HUGE sales. If they split in half (Exxon and Mobil) and each company made only $20.3 billion would that be better? Maybe the media wouldn't make such a big deal of it then.
- The implication is that a few fat cats are getting rich off us. Actually, corporate insiders own only 0.09% of the stock. 52.7% is owned by banks and mutual funds, and 47.2% is owned by individuals like you and I.
If you want to see even higher prices along with shortages just let the government start controlling prices and profits.
Lets talk about ULSD for a second. the switch to ULSD was one of the reasons listed for increased fuel costs. I have no doubt that ULSD takes more refining to lower its sulfur content, hence more cost. However I doubt its much better (lower sulfur) than LSD till it gets to the consumer. ULSD is shipped in the same tankers, pipelines and holding facilities as LSD, HSD, Heating oil and even JP4. They don't clean these tanks between shipments. I'd bet that the sulfur content raises nearly to that of LSD during shipment and storage.
par724b wrote: I was looking at the price of diesel today and it is 75 cents more that regular unleaded. I was wondering ... WHY? Can anyone really explain, in plain English, what could cause such a difference?
====================================================================== 1. interesting article in Transportation Topics from Bob Costello chief ecnomist, said " political pressure on the major oil companies helped drive down gasoline prices, as they expanded gasoline production and importation".
Bill O'Grady is a oil market analyst for A G Edwards group out of ST Louis says "Refiners and the oil industry as a whole were facing a political black eye from gasoline prices, which are very visible".
The current administration allowed diesel fuel surchage to take the American trucker out of the picture as far as any consumer group putting pressure (trucker strikes) on the current administration. Looks like it worked in the short term but long term inflation is catching up now with rising prices for all commodities its gonna' hit hard.
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(snip)
And while we are on the subject why is fuel so unstable these last few years, is it really that hard to control supply and demand?
What do you think?
Just the random thoughts of a man trying to figure out WHY?
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2. supply and demand is only a small player in fuel prices. With over fifty percent of our refinning capacity shut down fuel prices will remain high. Who does that benifit ?? Certainly not the American consumer. Refiners aren't about to spend the money to update those old plants and bring them back on line. With half of them shut down and high fuel prices why should they. They and their supporters are laughing all the way to the bank.
3. The biggest player in high fuel prices is crude which is used on the world political scene as a tool. High crude prices will mean high fuel prices.
Who does any or all of those three points benifit ?? It sure isn't the American consumer.
JIM
* This post was
edited 03/11/08 11:05pm by an administrator/moderator *
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kmb1966 wrote: It's algebra. Gas engines overall get lower mpg than diesel engines. By calculating a mileage trip cost of the avg gas engines, and then comparing to the avg of diesel engines, and then solve for X. By solving for X you need the diesel price to be higher than gas price to get the same amount of $ from the consumer base. There are in particular specific examples that make "X" even actually higher than the current inflated diesel price, but overall it works out to be plain algebra. Another way to look at it is that the energy companies are selling energy, right? So, since diesel has ~20% more energy per gallon than gasoline (one of the reasons you get higher mpg) then it should sell for 20% more also. And it should be worth 20% more for that reason.
Just a question, do people on this site believe that oil companies don't have sales/marketing departments with strategies??? Do you think the gas and diesel prices are simply set by some invisible force? Oil companies have marketing meetings too, just like anyone else. Yes, they have those meetings and they're discussing what they can do to increase sales and profits. Is that a surprise? These are not non-profit companies!
kmb1966 wrote: It's algebra. Gas engines overall get lower mpg than diesel engines. By calculating a mileage trip cost of the avg gas engines, and then comparing to the avg of diesel engines, and then solve for X. By solving for X you need the diesel price to be higher than gas price to get the same amount of $ from the consumer base. There are in particular specific examples that make "X" even actually higher than the current inflated diesel price, but overall it works out to be plain algebra. Another way to look at it is that the energy companies are selling energy, right? So, since diesel has ~20% more energy per gallon than gasoline (one of the reasons you get higher mpg) then it should sell for 20% more also. And it should be worth 20% more for that reason.
Just a question, do people on this site believe that oil companies don't have sales/marketing departments with strategies??? Do you think the gas and diesel prices are simply set by some invisible force? Oil companies have marketing meetings too, just like anyone else. Yes, they have those meetings and they're discussing what they can do to increase sales and profits. Is that a surprise? These are not non-profit companies!
No arguement here. Could be the 20%. Makes sense, and at least it is not the same ole-same-ole refinery excuse.
No arguement regarding the meetings to maximize sales. That was my point. I don't believe it is wrong or illegal (or should be), but lets call the spade a spade and a shovel a shovel here. Better than the same-ole same-ole refinery capacity excuse.
All I can say is I'm glad bought oil stocks last year. Now if the future traders will keep the prices up I can afford 5.00 fuel. Oh yes, and the future traders don't work for the oil companies so who is really profiting. And I'm tired of hearing Exxon made x dollars last year. If they could liquidate their assets and invest in guaranteed CD's they would make as much money with zero risk. And nobody remembers the years that the oil companies lost money. And according to my research, Lowe's made a higher percentage profit than Exxon did last year. People don't hear percentages, they hear amount. So there.
Part of it's the "Law of Unintended Consequences"... A few decades ago, the politicans figured that they'd make us really happy with cheap consumer goods and fewer drudge jobs, so we'd be pacified and vote to keep them in power. So now we're sending huge bales of dollars to China and other Asian countries to do those jobs and make those goods.
The unintended part is that the politicans didn't foresee that all those now-employed Asians would buy stuff like cars and gas and diesel with all those dollars... competing with us and driving up oil prices. And the ships and trains and trucks and planes that bring us those cheap goods are busy burning up that diesel... Meanwhile, a bunch of us are unemployed or flippin' burgers... I don't think we're anywhere near the bottom of this slide yet....
Jim, "Let me tell you about my conspiracy theory.... "
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kaydeejay wrote: Let's not forget Exxon's FIFTY BILLION DOLLAR PROFIT in 2007!!!
I'm confused ... you mean Exxon is not a non-profit charity?!? They're actually a business entity that exists solely for the purpose of making a profit? Well, I never heard such nonesense!
Let's get real here folks. Companies stay in business by making a profit. If the product/service they peddle is in high demand, their profits will reflect that. It's the reward for the risks taken. If you owned a business, would you lower your prices if you felt your profits were too high? Are any of you willing to take a pay cut so that your employer can lower operating costs to be able to lower prices in order to reduce profit?
I don't know the exact PERCENTAGE of profit they have made, but it's easy enough to find. It's been shown on many of the countless topics here about oil and fuel prices. However, I do know that Exxon's profits are far less (percentage-wise) than many other companies.
Some will cry Market manipulation. If the market is being manipulated, OPEC and the Wall Street traders are the manipulators. Big Oil is just a fortunate beneficiary.
Some will say that fuel is an essential need. Many believe that the price of gas should be lower as it is needed for daily living. What about the price of drugs? Aren't they needed for daily living? Ever scanned your hospital bill and seen what you're charged? Wonder what the profit margin is?
Elkhartjim wrote: All I can say is I'm glad bought oil stocks last year. Now if the future traders will keep the prices up I can afford 5.00 fuel. Oh yes, and the future traders don't work for the oil companies so who is really profiting. And I'm tired of hearing Exxon made x dollars last year. If they could liquidate their assets and invest in guaranteed CD's they would make as much money with zero risk. And nobody remembers the years that the oil companies lost money. And according to my research, Lowe's made a higher percentage profit than Exxon did last year. People don't hear percentages, they hear amount. So there.
I haven't invested in the individual oil stocks, but I've still done OK. I buy ETF's and sector funds, such as Fidelity Select Energy (up 45% in 2007) and Energy Service (up 55% in 2007).
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And it's not like it's illegal or immoral. How about a little perspective:
