Rajan Wilcox
The outlook for diesel fuel prices is dependent on a multitude of factors, including the cost of crude oil, refinery processing, marketing, distribution, and taxes. Local market conditions and the location of the fueling station can also affect retail diesel fuel prices. Global Petrol Prices (GPP) has identified two main factors that drive diesel price changes across countries: oil prices and government policies. Oil prices are likely to remain high as long as the conflict between Israel and Iran continues, and diesel prices will rise as a result. Diesel fuel prices are released weekly, and as of July 1, 2022, the federal excise tax for on-highway diesel fuel was 24.30 cents per gallon in the US, with an average total state tax of 33.45 cents per gallon.
| Characteristics | Values |
|---|---|
| Retail diesel fuel pump price components | Costs of crude oil, refinery processing, marketing and distribution, and taxes |
| Cost of producing and delivering diesel fuel to consumers | Crude oil, refinery processing, marketing and distribution, and retail station operation |
| Retail pump price reflects | Costs and the profits (and sometimes losses) of the refiners, marketers, distributors, and retail station owners |
| Retail price at the pump | Includes federal, state, and local taxes |
| Federal excise tax for on-highway diesel fuel | 24.30 cents per gallon |
| Federal Leaking Underground Storage Tank fee | 0.1 cents per gallon |
| Average total state taxes and fees for on-highway diesel fuel as of July 1, 2022 | 33.45 cents per gallon |
| Average total state taxes and fees for on-highway diesel fuel as of January 1, 2024 | 34.74 cents per gallon |
| Factors affecting retail diesel fuel prices | Local market conditions, location of the fueling station, ownership of retail outlets |
| Diesel price responsiveness | A 10% change in oil prices causes a 7% change in diesel prices in the US, while it leads to a 3% change in Germany |
| Oil price shocks | Tend to magnify price disparities across countries due to variations in diesel price responsiveness |
| Oil prices and diesel prices | Oil prices are likely to stay elevated due to the Middle East conflict; diesel prices will rise as a result |
| Global oil inventories | Expected to drive crude oil prices lower over the forecast period |
Explore related products
What You'll Learn
Diesel fuel prices are affected by crude oil prices
Diesel fuel prices are influenced by a variety of factors, including the cost of crude oil, refinery processing, marketing and distribution, and taxes. The cost of crude oil is a significant component of diesel fuel prices, and fluctuations in crude oil prices can have a direct impact on the cost of diesel fuel.
Crude oil prices can be affected by a range of geopolitical and economic factors, such as conflicts in oil-producing regions, changes in global demand, and the performance of financial markets. For example, in 2022, tensions between Israel and Iran caused a spike in oil prices, with benchmark West Texas Intermediate (WTI) crude oil trading near $73 per barrel. This increase in crude oil prices contributed to higher diesel fuel prices, with diesel averaging $3.57 per gallon in the United States.
The cost of refinery processing, which includes the refining and processing of crude oil into diesel fuel, can also impact diesel fuel prices. Refinery processing costs can vary depending on a variety of factors, such as the price of energy, the efficiency of the refinery, and the complexity of the refining process. Additionally, the costs of marketing and distributing diesel fuel can also affect the final price that consumers pay. These costs include the expenses associated with transporting the fuel to retail stations and the profits (or losses) of the marketers and distributors.
Another factor that influences diesel fuel prices is government taxes and duties. In many countries, diesel fuel is subject to various taxes, such as excise taxes, sales taxes, and value-added taxes (VAT). These taxes can account for a significant portion of the final selling price of diesel fuel. For example, in the United Kingdom, the fuel duty for diesel fuel was 52.95 pence per litre as of September 2024, and the VAT was 20%. When oil prices are falling, the high level of tax can create the perception that pump prices are not reducing proportionally.
It's important to note that local market conditions and factors, such as the location of the fueling station, can also impact diesel fuel prices. For instance, in some cases, retail outlets may be owned by refiners, while others may be independent businesses that purchase diesel fuel for resale to the public. Overall, the outlook for diesel fuel prices is influenced by a complex interplay of factors, with crude oil prices playing a pivotal role in determining the cost of diesel fuel for consumers.
Diesel Fuel Prices in Italy: The Cost Explained
You may want to see also
Explore related products
$38.99
Refinery processing costs
The cost of producing diesel fuel includes the costs of crude oil, refinery processing, marketing and distribution, and retail station operation. The retail pump price reflects the costs and profits of the refiners, marketers, distributors, and retail station owners. The relative share of these cost components in the retail price of diesel fuel varies over time and among different regions.
In the case of diesel fuel, the increasing use of additives like cetane improvers, additives improving cold resistance for diesel fuel ("pour depressants"), and other catalysts can slightly increase refinery processing costs. Additionally, the transition to ultra-low-sulfur diesel (ULSD) fuel in some regions, such as the United States, has affected diesel fuel production and distribution costs.
The economics of refining has improved over time due to productivity progress, improvement in operating rates, efforts on various items, and strict selection of investments. The development of conversion units, such as fluid catalytic cracking (FCC) units, has also contributed to improving the economics of refining by increasing fuel efficiency and providing a moderate investment cost compared to alternative solutions. The industry has evolved from a simple process to manufacture kerosene in the 19th century to a sophisticated process to deliver high-quality products for modern engines.
The Difference Between Dyed and Undyed Diesel Fuel
You may want to see also
Explore related products
Marketing and distribution expenses
The cost of delivering diesel fuel to consumers includes marketing and distribution costs, in addition to crude oil costs, refinery processing, and retail station operation costs. The retail pump price reflects the costs and profits (or losses) of refiners, marketers, distributors, and retail station owners. The relative share of these cost components in the retail price of diesel fuel varies over time and across different regions.
Crude oil prices are volatile and subject to fluctuations due to various factors, including production costs, global demand, and political stability. Offshore drilling, for instance, tends to be more expensive than land drilling. Global demand is influenced by economic growth, with booming economies driving up oil demand and prices. Political instability, particularly in oil-producing regions like the Middle East, can also lead to spikes in crude oil prices.
Distribution costs for diesel fuel are influenced by the availability of refinery capacity. During periods of oversupply, refineries may need to operate at reduced rates, impacting the cost of refining diesel fuel. Environmental regulations can also affect distribution costs by mandating the use of costlier processes or additives.
It is important to note that while taxes and government policies are outside the scope of marketing and distribution expenses, they significantly impact the final price of diesel fuel. Federal and state taxes, such as excise taxes, contribute to the overall price and can influence the cost of transportation and other diesel-dependent services.
Why Diesel Turns Black: A Primer
You may want to see also
Explore related products
Taxes and government policies
Government policies and regulations can significantly influence diesel fuel prices. The extent and type of fuel market policies and the level and kind of taxes and fees can lead to different diesel price responses across countries. For instance, a 10% change in oil prices may result in a 7% change in diesel prices in the United States, while in Germany, the same change in oil prices may cause only a 3% change in diesel prices. Government intervention often increases following significant oil price shocks, leading to shifts in market policies and amplified price uncertainty.
The production and delivery costs of diesel fuel are also affected by government policies. For example, the transition to ultra-low-sulfur diesel (ULSD) fuel in the United States impacted diesel fuel production and distribution costs. Additionally, government forecasts and outlooks can provide insights into expected diesel fuel price movements. For instance, the U.S. Energy Information Administration (EIA) forecasts that U.S. crude oil production will decline from 13.5 million barrels per day in the second quarter of 2025 to about 13.3 million barrels per day by the fourth quarter of 2026, which may result in decreasing oil prices and subsequently impact diesel fuel prices.
Moreover, geopolitical events and conflicts can influence government policies and, consequently, diesel fuel prices. For example, the Middle East conflict between Israel and Iran has impacted oil prices, with benchmark West Texas Intermediate (WTI) crude oil trading near $73 per barrel and the potential to increase further if the situation escalates. The market's concern revolves around the risk of Israel targeting Iran's oil export facilities or Iran disrupting oil shipments in the Strait of Hormuz. As a result, diesel fuel prices are expected to rise, with the national average price already at $3.57 per gallon and projected to increase further.
The Pitfalls of Pitting Diesel Fuel: What You Need to Know
You may want to see also
Explore related products
Local market conditions and fuel station locations
Local market conditions and the location of the fueling station can influence diesel fuel prices. Retail outlets are either owned by refiners or are independent businesses that purchase diesel fuel for resale. The cost of producing and delivering diesel fuel to consumers includes crude oil costs, refinery processing, marketing and distribution, and retail station operation. The retail pump price reflects the costs and profits of the refiners, marketers, distributors, and retail station owners. The relative share of these cost components in the retail price of diesel fuel varies over time and among different regions.
The retail price at the pump also includes federal, state, and local taxes. The federal excise tax for on-highway diesel fuel is 24.30 cents per gallon, and the federal Leaking Underground Storage Tank fee is 0.1 cents per gallon. As of July 1, 2022, the average total of state taxes and fees for on-highway diesel fuel was 33.45 cents per gallon. Local and municipal government taxes also contribute to the final selling price of diesel fuel.
The price of diesel fuel is influenced by worldwide demand and country-specific factors. For example, the transition to ultra-low-sulfur diesel (ULSD) fuel in the United States affected diesel fuel production and distribution costs. Oil price changes have a varying impact on diesel prices across countries. A 10% change in oil prices may cause a 7% change in diesel prices in the US, while it leads to only a 3% change in Germany. Significant oil price shocks tend to magnify price disparities across countries due to variations in diesel price responsiveness.
Government policies and regulations, as well as the level and type of taxes and fees, can also influence diesel prices. Increased government intervention can shift markets towards more regulated policies, amplifying price uncertainty and country-specific differences.
The Origin of Diesel Fuel: Its First Uses
You may want to see also
Frequently asked questions
The cost of producing and delivering diesel fuel to consumers includes the costs of crude oil, refinery processing, marketing and distribution, and retail station operation. Local market conditions and factors such as the location of the fueling station can also affect retail diesel fuel prices.
Significant oil price shocks tend to magnify price disparities across countries due to variations in diesel price responsiveness. A 10% change in oil prices may cause a 7% change in diesel prices in the US, while in Germany, it may lead to a 3% change.
Diesel prices are expected to rise in the near term. As of November 2022, diesel was averaging $3.57 per gallon in the US and could break $4 in the event of a sharp rise in oil prices due to geopolitical tensions in the Middle East.
