Why has the price of diesel dropped below gas?

Just curious. Diesel has been higher than regular gas by 20 or 30% for a while, all of a sudden it's 5-10% less. Is it because the 'new' diesel formulation is now more common and the economies of scale have dropped? Is it a supply/demand issue?

Makes no sense.

 

I always thought that's the way it SHOULD be.....my dad drove diesel in the 1980s because it was a few cents cheaper per gallon than regular. This means shipping, nationwide, was cheaper as well. Personally, I'm glad its back. Euro Turbo Diesels are coming back, I can feel it.....

 

Really.

Why on earth was it ever higher than gas?

 

Taxes. It was meant to extract money from the heavy trucking industry, ostensibly to put back into the highway system.

I wonder if this is not just supply and demand - as the recession deepens, maybe over the road trucking is way off?

 

It was my understanding that when the US required low-sulphur diesel last year, the costs of production went up and it was reflected in the price. When we had $4/gallon gas, I did some research on diesel cars, but the price premium on the the fuel didn't really make sense for the purchase of a diesel car. The Jetta is the best example. Great mileage as a diesel, but the premium fuel price made the mileage advantage a wash over the gas powered car.

If diesel is now back to it's 'below gas' prices, suddenly a 50mpg Jetta looks pretty good.

 

You'll get 36-38mpg with the 09 jetta tdi. I have one for work and that's the mileage I get with my car. Don't forget that the diesel's have much higher resale value vs the gas version. Depeding on your state (PA here) you don't have to pay for yearly emmissions testing. The best part is that they have a large portion of the power down low in the rpm's. One of my previous jetta tdi's I drove for 60k miles over 18 months and sold it for what I bought it for. I did put about 1k into for maintenance. Not a bad deal for a work car.

 

Worldwide Diesel demand is way down. Diesel is used in trucking ,farming, heavy equipment and rail. With the slowdown world wide in construction much less diesel demand. Gas prices are artifically held high by hedge funds and other investors going from $ to gas/crude oil thinking there will be a upsurge in demand staring in Asia last quarter of the year. World wide stocks of oil are very high at the moment and almost no storage cap left. I think there will be no take off on Asian demand as US economy still in free fall.

 

http://www.nytimes.com/2009/06/04/business/04markets.html?hpw

I guess I called this one right. Oil prices starting to tumble in todays NYT

 

OTR trucking is definitely way off. Between increased fuel efficiency and decreased freight capacity, trucks are using a lot less diesel fuel than they have in the past.

 

Rail traffic is up. Things that we used to truck are now being sent by rail.

 

But wasn't the farm-use (or whatever it was called) diesel still more than pump gas too?

 

You sure about that? Rail has been on it's rear as well.

 

Yup, but I would guess that the volume in farm use was only a fraction of that for the big rigs. I remember that for farm use if you had propane powered equipment, which you could fill from your regular home use tank, you had to declare a special vehicle use tax even for that.

 

There are hundreds of locomotives parked in the main UP rail yard here which is on one of UP's main east-west routes. The locomotives have been parked for months. Every little used rail siding I pass had idle rolling stock parked on it: box cars, reefers, tank cars, etc. Rail traffic is definitely not up.

 

Oil is going up. You may have jumped the gun.

 

Are OTR trucks increasing fuel mileage? I know that my newer diesel light duty trucks have worse mileage than my older ones.

 

I remember reading that the OTR trucks mpg went down by 1 or 2 mpg with ulsd, that's a big drop considering that they were getting 7-9mpg prior to the switch to ulsd.

 

I think a lot of refineries during the $3 and $4 gas last year started to tool for increased diesel production, and a lot of that is finally coming online.

 

one word "traders"
and NO I am not to blame for any of the price increases. I don't touch oil.

 

Yes. A big part of the increased efficiency is due to drivers paying more attention to their driving habits (because fuel comes out of their wallets in our fleet) and part of it is attributed to new technologies. Companies are also taking steps to cut the top speed of their trucks so that company drivers slow down and run more efficiently. Drivers who can't run efficient trucks are cut because no one can afford to keep them on the road.

7-9 mpg? Who's getting that in an OTR truck? Our absolute top performers barely eclipse 7 mpg now. I've never heard of a fleet averaging anything close to 9 mpg.

 

Overall - All Cargo shipping is down. So, diesel supply > demand.
http://globaleconomicanalysis.blogspot.com/2009/05/rail-traffic-down-truck-traffic-down.html

 

My bad for being off by 1 or 2mpg. I was just saying how these trucks don't/didn't get the best mpg with lsd vs ulsd