[ad_1]
But there’s another important fuel on the gas station’s price tag, and the national average price currently tops gasoline by more than a dollar a gallon: diesel fuel.
“Diesel is what drives trucks. It’s what powers our global economy,” boasts Joseph Sikorra, equity analyst at Aptus Capital Advisors.
But diesel isn’t just critical to trucking—it’s fundamental to global transportation in general because the engines of heavy-duty vehicles like trucks, cargo jets, and boats run on diesel and its chemical siblings. Therefore, when it is very expensive to send products to the country and the world, the price of the products transported by those delivery vehicles increases, thus increasing the inflation.
Diesel prices were more expensive than gasoline earlier today due to factors such as the ongoing war in Ukraine, limited refining capacity and post-Covid energy demand that has squeezed global oil supplies and driven up prices. but why?
There are three main reasons for the price difference: the shift to cleaner diesel blends, higher state and federal taxes, and diesel supply and demand.
Waste diesel
In the year In 2006, the US Environmental Protection Agency began issuing regulations that severely limit the sulfur content in diesel fuel. The agency did this because airborne sulfur content has become increasingly toxic to humans and the environment.
And starting in 2014, the EPA mandated that all diesel sold and manufactured in the United States must be ULSD (Ultra Low Sulfur Diesel) — a diesel standard that limits sulfur content to 15 parts per million. Sulfur content regulations have reduced toxic emissions by at least 90%, according to the EPA.
EPA regulations greatly benefit the environment. But lowering diesel’s sulfur content has led to lower energy density (lower fuel economy per gallon) and higher production costs at the refinery, putting pressure on prices.
Diesel duty
President Joe Biden’s administration recently asked Congress to end federal taxes on diesel and gasoline. Regardless of whether or not the proposed tax holiday is effective, the focus is on the tax itself.
The federal motor fuel excise tax, unchanged since 1993, imposes an additional 18.3 cents tax on gasoline and 24.3 cents tax on diesel. Revenue from the tax supports the Highway Trust Fund, a federal purse that finances highway construction and maintenance and other mass-transit projects.
In addition to the federal tax, each state has its own additional duty on both fuels – the average diesel tax is 7.55 cents higher.
Diesel tax is higher because diesel engines, trucks and buses are the primary vehicles and the road conditions are heavier than the average automobile.
Demand for diesel
Finally, the higher price of diesel is due to the basic economic principle of supply and demand: insufficient supply combined with barrels and demand barrels.
On the supply side, diesel is produced at a slower rate than gasoline. In the US, 19 to 20 gallons of gasoline are produced for every barrel of crude oil. This figure drops to just 11 to 12 gallons for diesel.
On the demand side, diesel and its molecular siblings help produce, grow and transport almost all consumer goods. The fuel powers engines in trucks, trains, industrial machinery, construction and farm equipment, buses, generators, home heating systems, ships and military vehicles.
Gasoline may power America’s cars, but because diesel drives America’s economy, its price also affects our daily lives.
Correction: An earlier version of this story misstated cargo and fuel-moving chemicals. Trucks run on diesel fuel, planes and boats run on its chemical cousins.
[ad_2]
Source link
