Why Is Diesel Still Expensive?

The cost of diesel fuel is higher. Diesel fuel is subject to a higher federal excise tax than gasoline (24.4 cents per gallon vs. 18.4 cents per gallon for gasoline), and diesel fuel is occasionally subject to a higher state tax.

Why is diesel fuel so expensive now?

On a dollar-per-gallon basis, on-highway diesel fuel costs have been higher than regular-grade gasoline prices virtually continually since September 2004. This tendency contrasts with the prior historical pattern of diesel fuel prices being lower than gasoline prices, with the exception of harsh winters when demand for heating oil drove diesel fuel prices higher. Diesel fuel costs have been higher than conventional gasoline prices in recent years for three key reasons:

  • Diesel and other distillate fuel oils have seen strong demand, particularly in Europe, China, India, and the United States.
  • In the United States, the move to less polluting, lower-sulfur diesel fuels had an impact on diesel fuel production and distribution costs.
  • On-highway diesel fuel has a federal excise tax of 24.3 cents per gallon, which is 6 cents per gallon greater than gasoline.

This Week In Petroleum delves into the world of petroleum markets. This FAQ topic is covered in greater depth in the May 20, 2009 and March 26, 2008 editions.

Other FAQs about Diesel

  • Does the EIA provide state-by-state estimates or projections for energy output, consumption, and prices?
  • In the United States, how much biomass-based diesel fuel is produced, imported, exported, and consumed?
  • How much carbon dioxide is created by gasoline and diesel fuel consumption in the United States?
  • How much does a gallon of gasoline and a gallon of diesel fuel cost?

Why is diesel not cheaper?

The increased costs of diesel fuel are also influenced by taxes. The federal tax on diesel fuel is 6 cents per gallon higher than the federal tax on gasoline (24.4 cents versus 18.4 cents). The most recent tax hike occurred in the early 1990s, when diesel fuel was generally less expensive than gasoline.

Why is diesel expensive in Australia?

Just feeling how greasy diesel is will convince you that it is less refined than gasoline. So, if diesel is slightly less expensive to produce, why is it more expensive at the gas station than unleaded gasoline?

Diesel was 15 cents per litre more expensive than unleaded at my local servo earlier this month, costing $1.30 per litre.

But, given the recent strength of the dollar, which has reduced the cost of crude oil and diesel imports, shouldn’t fuel prices have fallen even further?

“Diesel users have not been ripped off,” argues Geoff Trotter, general manager of fuel market consultant FUELtrac.

“The drop in Singapore diesel product pricing from the highs of 2008 has very closely followed the reduction in pump prices since then,” he argues, waving graphs that show the correlation.

“Prices in Singapore have risen somewhat this month to offset the stronger dollar.”

Several fuel experts from organizations like as FUELtrac, the Australian Institute of Petroleum, and even the Australian Competition and Consumer Commission concur that Singapore’s massive refineries and trading houses are critical to what happens in Australia.

On a global basis, our refineries are insignificant, unable to supply Australia’s ever-increasing demand for diesel, which is imported to the tune of 40%, largely from Singapore.

However, because of the generally accepted policy of import-parity pricing, even if Australian refiners could produce plenty of cheap diesel, it would still have to be sold at Singapore rates.

When we sell petroleum products to New Zealand and the Pacific Islands, for example, we gain from the policy.

Diesel is in high demand in Asia, particularly for power generation in China and India’s rapidly rising economies.

As a result, we’re in a diesel competition with Asia. In Singapore, the comparatively pure fuel that is required in Australia is considerably more limited.

For diesel pricing, the tight supply-and-demand scenario is significantly more essential than the cost of production.

Trotter has a simple explanation for why diesel prices have returned to 2007 levels around the world. “The global financial crisis put a stop to demand in North America and Europe,” he claims.

Furthermore, because the last two winters in the United States have been relatively mild, there has been less demand for heating oil, resulting in more distillate being available to serve the Asia-Pacific region.

There are a few more elements that contribute to the fact that diesel is not as expensive as it appears.

To begin with, most diesel in Australia is sold in bulk to large users such as mines, farms, and trucking businesses. According to Trotter, the wholesale “terminal gate price” is often $10 per litre less than the retail roadhouse price.

Even if they don’t have their own tanks, most large trucking companies have card accounts with the fuel providers, allowing them to get roadhouse diesel for around $5 less than what you see on the price board.

And, because diesel truck owners are businesses, they may claim back around 20 cents per litre on the roughly 50 cents per litre in government taxes.

In and of itself, the tax is low by international standards. That’s why, behind Canada, New Zealand, the United States, and Mexico, Australia has the world’s fifth-cheapest diesel.

When reading a recent ACCC study, one almost feels sorry for the Australian petroleum firms, as the average profit margin on diesel across the refining, wholesale, and retail sectors has been just $6 per litre over the past seven years.

Why diesel is expensive than petrol?

The majority of the cost of fuel is made up of various taxes, which account for more than half of the total cost. To break it down, the central government charges Rs 32.98 and Rs 31.83 in excise duty on petrol and diesel, respectively. The state government also levies a VAT of Rs 18.36 for petrol and Rs 18.45 for diesel. A dealer commission is added to the fuel prices in addition to this.

For as long as anybody can remember, there has been a controversy about whether to buy a petrol or diesel car. Because of a variety of variables, various people had different preferences. One of the most important was the cost of gasoline. Previously, diesel was significantly less expensive than gasoline. Things have begun to change, though, as a result of the new rates. Because diesel has outperformed gasoline, many buyers are hesitant to buy a diesel-only vehicle.

We looked into whether buying a diesel automobile instead of a gasoline car makes sense.

Maintenance, efficiency, and cost are the three key variances or markers of dissimilarity between petrol and diesel cars in principle. The cost of diesel fuel was cheap, but the cost of cars was high. Diesel cars were also expensive to maintain, which added to their high cost. Because the quality of the diesel was poor, the vehicles required frequent maintenance, making them a high-maintenance vehicle. However, in recent years, the quality has significantly increased, making this issue a little less of a problem for customers. With a mileage difference of at least 4-7 km/l, high-efficiency diesel automobiles clearly have the upper hand, especially when compared to their petrol counterparts.

With the new pricing, the cost of diesel has overtaken that of gasoline, reversing this criterion completely. We chose the Ford Ecosport as the test vehicle for this investigation. As of June 24, petrol costs Rs. 79.76 per liter in Delhi, while diesel costs Rs. 79.88 per liter.

Will diesel be cheaper than gas?

Customers who drive a lot of highway miles prefer diesel engines, according to Bell Performance and Road and Track, because they are more efficient on these roads than gas engines. Diesel fuel simply has more energy per gallon than gasoline, making it more cost-effective overall. Diesel engines are still more fuel efficient than gasoline engines, but they are less so for city drivers. Diesel cars also have higher torque, which means they get better gas mileage and accelerate faster.

It’s crucial to keep in mind that some types of diesel fuel can reduce vehicle performance. Black diesel, biodiesel, and other improved diesel products are among them.

Diesel and gasoline are around the same price for most Americans. Diesel can sometimes be more expensive than gasoline, yet it can also be less expensive than gasoline. Even if you pay more on diesel fuel, a diesel engine will still provide better fuel efficiency throughout the life of the car. This is because an 8-liter gasoline engine would be required to produce the same level of power as a 6-liter diesel engine.

Diesel engines, according to Digital Trends, are more durable and endure longer than gas engines, with reliable operation and low maintenance requirements. Diesel cars used to be substantially heavier than comparable-sized gas cars, but thanks to contemporary manufacturing technologies, this is no longer an issue.

Diesel engines also have fewer components than gasoline engines, reducing the number of potential parts that could fail in your vehicle.

Diesel engines often require fewer repair and maintenance services than gasoline engines, resulting in a cost savings.

While early diesel engines had a well-deserved reputation for being noisy, current technology has largely addressed this issue. Noise pollution and dark smoke have been reduced, so if you were concerned about those issues in prior decades, you may wish to reconsider diesel as a viable option. Today, the driving experience in a diesel-powered vehicle is essentially identical to that of a gasoline-powered vehicle.

Is diesel worse for the environment?

When diesel fuel (refined from crude oil) is used, it emits a variety of hazardous emissions, and diesel-fueled vehicles are major emitters of pollutants like ground-level ozone and particulate matter. The US Environmental Protection Agency (EPA) created limits for the sulfur content of diesel fuel and emissions from new diesel engines to address this issue.

Is diesel easier to make than gasoline?

Diesel fuel is less volatile and heavier than gasoline, making it easier to refine from crude oil. As a result, diesel is generally less expensive than gasoline in most countries.

Is it better to have diesel or petrol?

Diesel engines produce more power at lower engine speeds than gasoline engines. Because diesel engines don’t have to work as hard to achieve the same performance as petrol engines, they feel more suited to prolonged highway drives. Diesel cars are also more suited for towing as a result of this.

Diesel automobiles get better mileage than petrol cars when compared side by side. The reason for this is that diesel fuel has more energy than petrol in the same volume. The difference can be significant: a diesel engine’s stated average mpg rating is often about 70 mpg, compared to around 50 mpg for an equal petrol model.

Because CO2 emissions are directly proportional to the amount of gasoline consumed by an engine, diesel cars emit less CO2 than identical petrol vehicles.

Is diesel more flammable than gasoline?

This is due to the fact that diesel is far less combustible than gasoline. It needs a lot of pressure or a long flame to ignite diesel in an automobile. When you throw a match into a pool of gasoline, however, it doesn’t even contact the surface; instead, it ignites the vapors above the surface.

Is it worth buying a diesel car in Australia?

Diesel has had a stench for a long time, but with the Volkswagen crisis and major European towns considering banning it, it appears to be a fuel source that is more offensive than ever. So, should you invest in one?

Diesel was once primarily used in farm machinery and long-haul transportation, with agricultural producers receiving a subsidy on the price per litre.

Diesel engines have been immensely popular in Europe for many years, where diesel is often cheaper than gasoline, thanks to the introduction of turbocharging in particular.

Because diesel is less volatile than gasoline, cold starts require higher compression and unique heating components in the combustion chamber. However, once up and running, a diesel engine is exceptionally fuel efficient, using roughly 30% less gasoline than an equivalent petrol engine.

Diesel prices are currently approximately the same as standard unleaded, making them more appealing, especially in comparison to faster automobiles that require Premium Unleaded, which costs up to 20c per litre more.

However, you will often pay more up front for a diesel-powered car, up to 10% to 15% more, so buy a calculator and calculate how long it will take you to repay that initial outlay in fuel savings. Simply put, if you travel a lot of miles, the diesel’s fuel economy will be appealing, and this will be even more so if gasoline prices continue to rise.

More fuel from a tank means fewer trips to the servo, which saves time and calories (curse those tempting chocolate-covered counters).

If you’re buying a small, inexpensive automobile that will be economical even with a gasoline engine, the additional expense is more difficult to justify.

Diesel engines lack excitement in terms of driving because they don’t like to rev high like petrol engines, but they make up for it at the bottom end.

Diesel’s superpower is torque, which translates to a strong push off the line and the capacity to tow huge loads. Diesel economy does not grow as quickly as petrol when a weight is added, which is why it is the preferred fuel for big trucks.

In the long run, diesel vehicles depreciate more quickly than gasoline vehicles (especially if they’re VWs), and the risk is that this scenario will worsen, given what we now know about emissions.

The ugly truth

Modern diesels are marketed as being safe and environmentally friendly, but new study has uncovered an uncomfortable truth.

Major producers failed to match their laboratory results, resulting in dangerously excessive levels of nitrogen dioxide being released into the atmosphere.

In a real-world test, all but five of 29 ‘Euro 6’-compliant diesels exceeded pollution restrictions, with some emitting up to 27 times the permissible quantity of hazardous fumes.

In tests done by The Sunday Times newspaper in the UK, major manufacturers such as Mazda, BMW, and Volkswagen, all of which offer the same diesel engines here, failed to match their laboratory results, spewing harmful and unlawfully high quantities of nitrogen dioxide.

Mazda’s SkyActiv diesel produced four times the Euro 6 restriction, BMW’s all-wheel-drive X3 produced over ten times the limit, and Volkswagen’s Touareg produced an incredible 22.5 times the EU limit.

The Kia Sportage, on the other hand, was significantly worse, producing 27 times the Euro 6 limit.

Nitrogen dioxide exposure leads to serious lung and heart problems, as well as an increased risk of asthma, allergies, and airborne infections. Sick babies, miscarriages, and birth deformities have all been linked to the harmful gas.

The World Health Organization estimates that nitrogen dioxide causes about 22,000 deaths each year in Europe, where oil-burning cars account for roughly half of all vehicles.

Diesels account for roughly a fifth of the Australian fleet, but their number has increased by more than 96% in the last five years.

In cars alone, Australians now consume about three billion gallons of diesel each year, with another 9.5 billion litres consumed by commercial vehicles.

Cars, trucks, buses, and bicycles account for about 80% of nitrogen dioxide pollution in Australian cities.

The Mazda6 diesel, which is powered by the same 2.2-litre ‘SkyActiv’ engine as the CX-5, was one of the cars to break the Euro limitations in the UK test. Mazda sells roughly 2000 CX-5s every month in Australia, with diesel accounting for one out of every six sales.

As it traveled along an urbanized path, the SkyActiv diesel tester produced four times the Euro 6 limit on average.

While it failed the test, a Mazda UK spokeswoman explained that Euro standards are more concerned with measurement consistency than with real-world emissions.

“The current test is designed to illustrate differences in cars based on tight laboratory circumstances, ensuring consistency across all manufacturers and allowing customers to make decisions based on data obtained under identical conditions,” Mazda adds.

“The test cycle isn’t flawless, but it does provide a benchmark for consumers to choose a car based on the most essential considerations — environmental and financial.”

“However, we recognize the test’s limitations and the fact that it rarely matches real-world driving; the Euro 6 award is based on official test results rather than real-world data.”

Because of Australia’s pollution standards, we are more likely to be exposed to harmful chemicals.

Mazda’s poor performance was overshadowed by the Kia Sportage, which emitted more than 20 times the legal limit of nitrogen dioxide.

Kevin Hepworth, a spokesman for Kia Australia, would only comment that Kia vehicles fulfill pollution criteria.

He explained, “The cars we import into Australia are comply with Australian Design Rules.”

According to the World Health Organization, air pollution causes 3.7 million premature deaths each year, making it “the world’s worst environmental health concern.”

Nitrogen dioxide and particulate matter, which is the superfine soot found in diesel exhaust, are two of the most harmful components in air pollution.

Despite the fact that Australia’s air is among the cleanest in the developed world, air pollution claims the lives of more than 3000 Australians each year, approximately three times the number of people killed in automobile accidents.

According to the Australian Medical Association, Australia’s pollution limits put us at higher danger of harmful chemical exposure.

The AMA believes that “current Australian air-quality standards fall behind worldwide standards and have failed to keep pace with scientific findings.”

Diesel is still seen as an environmentally beneficial alternative in Australia, with improved fuel economy resulting in less CO2 emissions, and newer diesels are marketed as high-tech units that burn cleanly.

While this may be accurate in the lab, real-world studies show it to be a load of hot, filthy air.