Why Does The Price Of Diesel Fluctuate So Much?

Originally designed in 1892 to be used in the compression ignition engine named after it's inventor Rudolf Diesel. Diesel Engines have the ability to run on a wide variety of fuels, such as diesel fuel and modified vegetable oil. The most commonly use ddiesel fuel is refined from crude oil. This fuel is most widely used by commercial businesses to deliver goods to the market and to fuel some commercial machinery. Due to its effect on the economy it is important to understand how the fuel is produced.


Diesel Fuel consists of different grades or types of distillates. The primary distillate used by the majority of diesel engines in the USA is No. 2. This distillate is also used as fuel oil for heating. Distillate No. 2 has a relatively low amount of sulfur. Standards for the sulfur content in diesel fuels were implemented in 2006. Ultra-Low Sulfur Diesel (ULSD) fuel replaced Low Sulfur Diesel (LSD) fuel.


By 2010 highway vehicles will be required to use Ultra Low Sulfur Diesel fuel. By 2015 the United States will primarily be an Ultra Low Sulfur Diesel fuel country. The change from LSD to ULSD will be most noticeable in the parts per million (ppm) of sulfur found in the fuel. LSD contains 500 ppm sulfur. ULSD contains 15 ppm sulfur.


Crude oil can be used to produce products such as heavy fuel oil, jet fuel, gasoline, heating oil and diesel fuel. Biodiesel is another fuel that is created using diesel fuel, vegetable oil and other ingredients. Biodiesel significantly reduces the emissions of carbon monoxide and hydrocarbon gases.


The primary fuel used in delivery vehicles, trains, buses, boats, semi trucks, and construction equipment is diesel fuel. Vehicles on the highway used 75% of diesel fuel in 2007. Off-highway equipment such as motors used in railroad, military, farming and construction used the remaining 25%.


Retail diesel fuel comes from a variety of locations.In 2007 about 4.5% of the diesel fuel used in the US came from foreign countries, primarily the Virgin Islands and Canada. The remaining amount was produced in U.S. refineries. Also in 2007 66% of the crude oil used to produce diesel fuel in U.S. refineries was imported from foreign countries. Most diesel fuel is transported by barge, rail or pipeline from refineries to major consuming areas where it is loaded and delivered by tanker trucks to service stations across the country.


Due to increased demand and a decrease in production diesel fuel has cost more than gasoline since September of 2004. Worldwide demand for diesel fuel has steadily been increasing in Chine, Europe and the U.S. Production has suffered because of the transition to Ultra Low Sulfur Diesel fuel in the U.S. The Federal excise tax also contributes to the price difference. The tax for diesel is six cents higher than for gasoline.