Rajan Wilcox
Diesel fuel prices have been higher than regular gasoline prices for almost two decades. In 2022, diesel traded at a record premium. This article will explore the reasons behind the high cost of diesel fuel, the factors influencing diesel prices, and the projected costs for the coming year.
| Characteristics | Values |
|---|---|
| Diesel fuel prices | Have been higher than regular gasoline prices since 2004 |
| Diesel fuel tax | 24.3 cents per gallon |
| Regular gasoline tax | 18.3 cents per gallon |
| Average cost of a gallon of diesel fuel in 2022 | $4.99 |
| Average cost of a gallon of diesel fuel in 2023 | $4.21 |
| Average cost of a gallon of diesel fuel (as of May 13, 2024) | $3.61 |
| Predicted average cost of a gallon of diesel fuel in 2025 | $3.85 |
| Primary determinant of diesel prices | Cost of crude oil |
| % of end consumer prices of diesel accounted for by crude oil | ~50% |
| Reason for high diesel prices | U.S. refinery slowdowns, the pandemic, and Russia's invasion of Ukraine |
| Reason for higher diesel prices than regular gasoline prices | Demand for diesel fuel and other distillate fuel oils has been high |
| Transition to less polluting, lower-sulfur diesel fuels affected diesel fuel production and distribution costs | |
| Excise tax for on-highway diesel fuel is higher than that for gasoline |
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What You'll Learn
- Diesel cars are more expensive to buy, but are more fuel-efficient
- Diesel fuel is more expensive due to its complex refining process
- Diesel cars have higher servicing costs due to additional systems
- Diesel prices vary across the UK, with London recording the highest price
- Diesel cars were once promoted by the UK government for their fuel efficiency
Diesel cars are more expensive to buy, but are more fuel-efficient
Diesel cars are generally more expensive to purchase than petrol cars. This is due to a number of factors, including the fact that diesel engines need to be stronger because they ignite fuel by compressing it to very high pressure rather than using a spark plug. Additionally, emission-control systems like diesel particulate filters and AdBlue, which help to reduce harmful emissions, also add to the cost. Diesel engines also tend to be heavier, have lower maximum RPM ranges, and are more expensive to repair.
However, diesel cars are more fuel-efficient than petrol cars. They have better fuel economy and longer engine life, which means that over the life of the engine, you can save money with a diesel car. For example, a diesel Mercedes E 220 d manages 58.9 mpg, compared to the petrol version which returns 44.2 mpg. This improved fuel efficiency can make up for the higher purchase and servicing costs of a diesel car, especially for high-mileage drivers.
The higher fuel efficiency of diesel cars is due to the fact that diesel engines have higher compression ratios than gasoline engines. This makes diesel engines high torque rather than high horsepower, which can make them slower in terms of acceleration. Diesel engines also tend to be noisier than petrol engines and there is less choice available on the market.
While diesel fuel prices have been higher than gasoline prices in recent years, this trend has not always been the case. Historically, diesel fuel prices were usually lower than gasoline prices, except during cold winters when demand for heating oil was high. The recent increase in diesel fuel prices can be attributed to factors such as relatively high demand, the transition to less polluting lower-sulfur diesel fuels, and higher federal excise taxes.
Overall, while diesel cars may be more expensive to buy and have some disadvantages in terms of performance and noise, they offer better fuel efficiency and can be more cost-effective in the long run, especially for those who drive long distances.
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Diesel fuel is more expensive due to its complex refining process
The price of diesel fuel has been a pressing issue in recent years, with various factors influencing its cost. One of the primary reasons for its high price is the complex and costly refining process it undergoes. While diesel fuel is denser and less reactive than gasoline, making it easier to refine from crude oil, the transition to Ultra-Low Sulfur Diesel (ULSD) has significantly impacted its production.
ULSD was introduced between 2006 and 2010 to reduce harmful emissions from diesel engines. However, this change in fuel composition has made the refining process more intricate and expensive. The removal of sulfur from diesel fuel requires additional refining steps, driving up the overall production cost. This transition to lower-sulfur diesel fuels has affected diesel fuel production and distribution costs, ultimately contributing to the higher price at the pump.
Moreover, the higher federal excise tax levied on diesel fuel compared to gasoline has also played a role in its higher price. In the United States, the federal excise tax for on-highway diesel fuel is 24.3 to 24.4 cents per gallon, which is significantly higher than the 18.3 to 18.4 cents per gallon tax on gasoline. This disparity in taxation naturally translates to a higher price for consumers.
In addition to taxes and refining costs, other factors have also contributed to the high price of diesel fuel. For instance, the demand for diesel fuel has been relatively high, especially in regions like Europe, China, India, and the United States. This increased demand, coupled with supply disruptions caused by events like the COVID-19 pandemic and the war in Ukraine, has further driven up diesel prices.
The complex refining process, taxes, high demand, and global supply chain issues have collectively made diesel fuel more expensive. While experts predict that diesel prices may decline in the coming years, the current high prices have been a significant concern for consumers and industries reliant on diesel fuel.
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Diesel cars have higher servicing costs due to additional systems
The cost of diesel fuel has been higher than regular-grade gasoline prices since 2004, and this trend is expected to continue. Diesel fuel prices are influenced by factors such as higher demand, the transition to less polluting fuels, and higher federal excise taxes.
Diesel car owners often face higher servicing costs due to the unique requirements of diesel engines. Diesel engines have stricter filtration requirements for fuel and engine oil compared to petrol engines. The common-rail systems in diesel engines operate at extremely high fuel pressures and cannot tolerate any contamination in the fuel. As a result, diesel engines require regular replacements of in-tank filters and the use of high-quality diesel-specific oils, filters, and coolants.
Additionally, diesel engines produce significantly more soot and oil contaminants, which can lead to increased maintenance needs. Neglecting regular servicing can result in costly repairs, as the buildup of contaminants can cause engine issues. It is crucial for diesel car owners to adhere strictly to the recommended service intervals and use only the specified types of fuel and oil to avoid expensive problems down the line.
Furthermore, the purchase of second-hand diesel vehicles can be risky, as the new owner cannot always verify whether the previous owner properly maintained the car according to the manufacturer's specifications. Misfuelling is also a common issue with diesel cars, and it can result in extremely high repair costs if the wrong type of fuel is used. Devices such as the British Diesel Key help prevent misfuelling and fuel theft, but they come at an additional cost.
While diesel cars offer benefits such as good fuel economy and lower CO2 emissions, it is important for prospective buyers to be aware of the potential for higher servicing costs due to the specialized requirements of diesel engines and the critical nature of proper maintenance.
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Diesel prices vary across the UK, with London recording the highest price
The price of diesel fuel in the UK varies depending on location, with London recording the highest prices. Several factors influence the price variation across the UK. Firstly, the wholesale prices that retailers pay can impact the pump prices passed on to drivers. Additionally, the retailer in charge of setting prices may not always be the company whose brand is displayed at the forecourt, leading to price differences between retailers.
London, being the capital and a major urban centre, tends to have higher diesel prices compared to other regions in the UK. Various factors contribute to this, including higher operating costs for businesses in the city and a greater demand for diesel fuel due to the city's large population and busy transport network.
The UK government's fuel duty, which is charged on every litre of diesel sold, also affects diesel prices. While the fuel duty rate was cut to 52.95p in 2022 following the Russian invasion of Ukraine, it has since been confirmed that the rate will remain at 57.95p per litre from Spring 2025. This fuel duty, along with VAT charged on the total price, can account for a significant portion of the diesel price, with tax representing around 43-44% of the total price paid by drivers.
Price variations can also be observed between different filling stations within London itself. Supermarkets and independent retailers can offer competitive prices, and even a small detour to a cheaper forecourt can result in savings over time. Additionally, cashback offers from credit card companies for spending at filling stations can further impact the overall cost of diesel for consumers.
While London generally records the highest diesel prices, it is important to monitor and compare prices across different regions and filling stations to make informed choices and manage fuel costs effectively.
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Diesel cars were once promoted by the UK government for their fuel efficiency
The price of diesel fuel has been a concern for many countries, including the UK, which is taking steps towards net-zero emissions by ending the sale of new diesel cars by 2030. This move is expected to create 40,000 jobs and reduce emissions equivalent to taking 4 million cars off the road.
Historically, diesel fuel prices have been higher than regular gasoline prices due to several factors: high demand, especially in Europe, China, India, and the US; the transition to less polluting, lower-sulfur diesel, which affects production and distribution costs; and higher federal excise taxes.
In the early 2000s, the Labour government in the UK promoted diesel vehicles under the leadership of then-Chancellor Gordon Brown, who introduced a new system of car tax aimed at protecting the environment. This policy was based on a sliding scale for vehicle excise duty (VED), making it cheaper for cars with lower carbon dioxide (CO2) emissions, which diesel cars tended to have.
However, this shift had unintended consequences, as diesel cars emitted higher levels of other harmful pollutants, such as nitrogen oxides and particulates, which damaged air quality. Despite concerns raised by civil servants and experts, the government did not want to be seen as "penalizing" diesel drivers, and the "dash for diesel" resulted in a trend associated with thousands of premature deaths annually.
Today, the UK government is taking steps to transition towards zero-emission vehicles, investing in electric vehicle infrastructure and incentivizing drivers to make the switch.
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Frequently asked questions
Diesel prices are influenced by regulations, taxes, and supply and demand. The U.S. government taxes diesel at a higher rate than regular gasoline—24.3 cents per gallon compared to 18.3 cents per gallon. Diesel fuel production costs are also higher due to the transition to less polluting, lower-sulfur diesel fuels.
Diesel prices are primarily determined by the cost of crude oil, which regularly accounts for around 50% of end consumer prices. Therefore, supply restrictions or weak demand outlooks can influence prices at the pump.
During the pandemic, the national supply of diesel fuel was impacted as people were driving less, so refineries were producing less fuel. However, there was still a demand for diesel from shipping companies due to the increase in online shopping. This lower supply and continued demand caused prices to increase.
The EIA projected the average cost of a gallon of diesel fuel to be $3.92 in 2024, down from $4.21 in 2023 and $4.99 in 2022. The EIA forecasted that the annual average cost of diesel fuel would further decline in 2025 to $3.85 per gallon.
