Sylvie Willis
The price of diesel fuel is a key concern for many people, especially those who rely on diesel-powered vehicles for work or personal use. With diesel fuel prices fluctuating, it's important to stay informed about the national average diesel fuel price to understand the broader market trends and make informed decisions. In this context, exploring the factors influencing diesel fuel pricing and examining potential strategies to mitigate the impact of price fluctuations on consumers and businesses becomes crucial.
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What You'll Learn
Diesel fuel prices and their fluctuations
Diesel fuel prices, like gasoline prices, fluctuate regularly and are released weekly by the U.S. Energy Information Administration (EIA). These fluctuations are influenced by various factors, including the cost of crude oil, supply restrictions, and demand outlooks.
Crude oil prices are a significant factor in diesel prices, typically accounting for around 50% of the end consumer prices of diesel. Therefore, when crude oil prices drop, diesel prices tend to follow suit. This relationship was evident in the latter half of 2024 when lower crude oil prices led to a decrease in diesel prices, with a gallon of diesel costing an average of $3.49 in December 2024—the lowest price in the previous 24 months.
However, other factors also come into play. Diesel engines have better fuel economy than gasoline engines, making them the preferred choice for large commercial vehicles. This higher demand for diesel in the commercial sector can impact diesel prices. Additionally, diesel-powered cars make up a small portion of the automobile market in the U.S., and diesel consumption is generally lower than gasoline consumption.
The availability of gasoline, which tends to be more widely available than diesel fuel, can also influence diesel prices. Gasoline usually sells at a lower retail price than diesel, affecting the demand and pricing of diesel fuel.
While diesel fuel prices fluctuate, federal and state motor fuel taxes, as well as adjustments for inflation, also impact the final price that consumers pay at the pump. These factors collectively contribute to the dynamic nature of diesel fuel prices and their variations over time.
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Diesel tax rates
As of January 1, 2025, the average state tax on diesel fuel in the United States was $0.35 per gallon, according to the U.S. Energy Information Administration (EIA). Since July 2024, diesel tax rates have remained relatively stable, with increases of less than half a cent in most states. However, there have been some changes at the state level, with diesel fuel taxes decreasing in four states and increasing in nine. Michigan saw the largest decrease of $0.036, while Connecticut had the most significant increase of $0.032.
The federal excise tax on diesel fuel is currently $0.244 per gallon, including the Leaking Underground Storage Tank (LUST) Fund charge of $0.001 per gallon. This federal tax rate has not changed since 1993 and is not indexed to inflation, which has increased by about 111% from October 1993 to December 2023. Due to this lack of indexation, the purchasing power of the fixed-rate diesel tax has declined over time.
In addition to the federal excise tax, state and local taxes and fees further contribute to the overall diesel tax rates. As of April 2019, these additional taxes and fees averaged 35.89 cents per gallon for diesel fuel. Combining the federal and state/local taxes, the US volume-weighted average fuel tax for diesel was 60.29 cents per gallon as of April 2019.
The proceeds from diesel fuel taxes are used to support various purposes, including transportation infrastructure and the Highway Trust Fund. Some policy advisors advocate for an increase in diesel taxes to generate more revenue for sustaining and improving the country's transportation network. However, the last increase in the federal diesel tax rate occurred in 1993, and any adjustments to tax rates are subject to political and economic considerations.
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Diesel fuel prices compared to gasoline
The average price of regular gasoline in the United States was 3.06 US dollars per gallon on January 6, 2025, compared to a diesel price of 3.51 US dollars per gallon. These figures represent a slight increase from the previous week due to the impending impact of winter storm Blair.
While gasoline and diesel fuel prices typically fluctuate, several factors influence their relative comparison. Firstly, diesel fuel is generally more expensive than gasoline due to higher production costs. Diesel fuel requires additional refining processes, such as distillation and treatment, which contribute to its higher price.
Secondly, the type of vehicles and equipment using diesel fuel can impact price comparisons. Diesel engines are commonly found in larger vehicles, such as trucks, SUVs, and certain types of machinery. These vehicles often require more fuel and have higher fuel efficiency, which can drive up the demand and price of diesel fuel.
Additionally, the availability and supply of diesel fuel versus gasoline can affect their relative prices. Diesel fuel is widely used in various sectors, including transportation, construction, and agriculture. Fluctuations in supply or disruptions in the diesel fuel market can lead to price adjustments. Similarly, gasoline prices are influenced by supply and demand dynamics, including factors such as crude oil prices, refinery capacity, and seasonal variations in consumption.
It's worth noting that the United States has some of the lowest conventional motor fuel prices worldwide. Despite fuel prices typically being higher in high-income countries, the US benefits from its position as the world's largest crude oil producer, enabling it to maintain relatively low retail prices for oil products.
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Diesel fuel prices by US state
As of November 2022, the states with the highest average diesel fuel prices include California ($6.28), Pennsylvania ($6.16), Vermont ($6.16), Connecticut ($6.12), Hawaii ($6.07), Rhode Island ($6.03), Maine ($6.00), New York ($5.98), New Jersey ($5.97), and Delaware ($5.95). These states experienced higher diesel prices than the national average.
In contrast, the states with the lowest diesel fuel prices as of 2025 are Texas ($4.69), Louisiana ($4.84), Oklahoma ($4.85), Mississippi ($4.86), Arkansas ($4.90), Kansas ($4.94), New Mexico ($4.95), Georgia ($4.97), Missouri ($4.99), and Alabama ($5.00). These states also tend to have lower prices for gasoline.
The price of diesel fuel is an important factor in the transportation industry, as most trucks and airplanes rely on diesel to operate. As a result, fluctuations in diesel prices can impact the cost of transporting goods, leading to potential changes in the prices of products such as groceries, household items, and clothing.
The variation in diesel fuel prices across different states in the US can be attributed to various factors, including local taxes, the cost of crude oil, refining margins, and regional differences in demand and supply. Additionally, factors such as transportation costs and local competition among fuel retailers can also influence the price of diesel fuel in specific states.
It is worth noting that diesel fuel prices can change frequently and may be affected by various economic and geopolitical factors. Therefore, while the provided information offers a snapshot of diesel fuel prices by US state, the specific prices may vary over time due to the dynamic nature of the fuel market.
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Diesel fuel prices and their impact on transport costs
Diesel fuel prices have a significant impact on transport costs, and this relationship is a crucial consideration for logistics companies, freight transporters, and consumers alike. As diesel fuel prices fluctuate, often in response to changes in crude oil prices, the costs of operating transport vehicles adjust accordingly. This, in turn, affects the pricing of freight shipping and logistics services, influencing the decisions of shippers and receivers and ultimately impacting the prices of consumer goods.
Logistics companies and freight transporters are directly affected by changes in diesel fuel prices. When fuel prices rise, carriers are faced with the choice of either absorbing the increased fuel costs or passing them on to their customers. In many cases, carriers are forced to raise prices to avoid making losses, which then impacts the shippers who utilize their services. This cost increase for shippers may then be passed on to the receivers of the freight, resulting in a domino effect.
To manage fuel price fluctuations, logistics companies may employ various strategies. Some companies restructure their operations, while others focus on optimizing their shipping methods. For instance, larger bulk shipments may be preferred over frequent smaller shipments to reduce transportation costs. However, this approach can negatively impact the logistics industry by increasing the number of empty miles driven by carriers. Additionally, the volatility in fuel prices presents challenges, as rapid changes can affect a trucking company's earnings and profit margins.
The impact of diesel fuel prices on transport costs also extends to the mode of transportation used. When fuel costs are high, logistics companies may opt for more fuel-efficient methods such as intermodal carriers or rail freight transport instead of fuel-inefficient options like road trucks. This shift in transportation mode can have implications for government policies and investments, as evidenced by a study in the Philippines that encouraged the prioritization of rail freight transport.
Furthermore, the relationship between diesel fuel prices and transport costs has led to the development of strategies to mitigate fuel consumption and costs. For example, a study on a recycling program proposed decentralizing the main depot to reduce annual fuel costs and carbon dioxide emissions. This highlights the potential for innovative solutions to balance transport costs and environmental sustainability. Overall, diesel fuel prices have a far-reaching impact on the transport industry, influencing operational strategies, pricing structures, and the adoption of more efficient transportation methods.
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