What’s behind the rise in diesel prices?

RALEIGH, N.C. (WNCN) — Although many of us worry about the price of gasoline, there’s another product from the pump that’s really driving inflation—we’re talking about the cost of diesel fuel. 

The price of diesel remains high, and it affects everything we buy.

Although the price of gasoline continues its steady march downward, the price of diesel remains high. The question: Why? The answer: It’s complicated. 

We’ve noticed it at the pump, the price of gasoline has fallen an average of 26 cents since June so why haven’t diesel prices followed suit?

“Supply is tight, demand is high,” said Patrick DeHaan, the chief petroleum analyst at GasBuddy.

As to what’s causing that tight supply, that’s where it gets complicated. Let’s start at the refinery.  

When crude oil is refined about 60 percent becomes gasoline and about 25 percent becomes diesel. Right now—refinery capacity is limited.  

“Because of COVID, a lot of refineries shut down,” said DeHaan. “We’ve lost a million barrels a day in refining capacity.”

Also, not all crude oil is created equal. There are many diffdrent varieties. Some can light crude or some heavy—like much of the oil exported by Russia. 

“Heavier oil yields more heavy products like diesel, bunker fuel and bunker oil,” said DeHaan. 

Russian’s war with Ukraine cut off much of the world’s supply of heavy oil. In addition, Europe is also using more diesel to generate power these days. 

“With natural gas prices at peak levels, some companies and countries are opting to generate power with diesel,” said DeHaan. 

Winter demand will also increase the need for diesel and bunker oil for heating. The EPA requirement for so-called clean diesel also plays into this. 

“That’s why since 2007 the price of diesel has been in excess of gasoline,” said DeHaan. The cost of removing the sulphur is expensive. 

Planes, trains, trucks and ships all rely on diesel and when they pay more for diesel—they pass the costs on to the consumer.   

“Diesel is what fuels the economy,” said DeHaan. 

Its high price also affects inflation too. 

With all that’s happening with the economy and with world events, industry analysts like DeHaan believe we won’t see diesel prices start dropping until next spring or summer.