Why Is Diesel So Expensive?
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Diesel fuel prices have reached sky-high sums in recent years thanks to several factors, including U.S. refinery slowdowns, the pandemic and Russia’s invasion of Ukraine.
There’s a bit more to the story, though. And while diesel prices remain high, experts predict those figures will decline this year and continue falling in 2025.
Why is diesel more expensive than gas?
Diesel is more expensive than gas because of regulations, taxes and factors that affect supply and demand.
The U.S. government taxes diesel at a higher rate than regular gasoline. Diesel fuel is subject to a tax of 24.3 cents per gallon, whereas regular gasoline’s tax is 18.3 cents per gallon, according to the U.S. Energy Information Administration, or EIA.
Diesel also has become more expensive because there has been demand for some of its components to be used in fuel for marine vessels.
In 2020, the International Maritime Organization tightened its fuel regulations for ships and other vessels. To meet those IMO requirements, shipping companies and other carriers started using a new kind of fuel, called very low sulfur fuel oil — referred to as VLSFO.
To make VLSFO, producers use distillate molecules that are also used to make diesel fuel. Some of those distillate molecules that would’ve been used for diesel were used to make VLSFO, according to FreightWaves, a price reporting agency focused on the global freight market.
So demand for diesel grew, and its prices increased.
At the same time, supply of diesel has been constrained, which also keeps fuel prices up.
And the war in Ukraine has kept fuel prices for diesel and gasoline high. After Russia invaded Ukraine in February 2022, the United States banned the import of Russian oil and petroleum products, which includes diesel. Russia is one of the world’s biggest oil producers, so removing Russia from the supply chain has dwindled supply.
More recently, fuel inventories in the U.S. declined because U.S. refineries have been operating further below their capacity than they typically do to accommodate bad weather and regular maintenance, according to the EIA.
» MORE: Are gas prices going down?
Is there a diesel shortage?
In a way, there’s a diesel shortage in that the amount of diesel the U.S. has on hand is lower than what’s typical. But the U.S. isn’t in danger of running out of diesel fuel anytime soon.
To understand why, here’s some context on the national supply of diesel fuel. There’s usually a few weeks’ worth of diesel in reserves, and that volume ebbs and flows depending on how much diesel the U.S. is using versus how much it’s producing or importing.
From 1991 until 2022, the U.S. had an average weekly supply of 35 days of diesel on hand, according to data from the EIA. The weekly average between January 2022 and April 2024 was 30 days.
During the pandemic, the national supply of diesel fuel was thrown out of whack. People weren’t driving as much, so refineries weren’t making as much gas and diesel fuel as usual. But freight and delivery trucks use diesel. And there was still plenty of demand for diesel from shipping companies, lest we forget all the online shopping that happened during the pandemic. Between that demand and the lower supply of diesel, prices shot up, according to Business Insider.
In addition to the pandemic, sanctions against Russia have kept diesel reserves lower than average because the U.S. typically imports petroleum products from Russia that are used in fuel production.
In late 2022, the U.S. had about 25 days’ worth of diesel fuel on hand — the lowest such figure since 2008. Since then, though, diesel reserves have rebounded. As of May 3, the U.S. had around 32 days’ worth of diesel fuel in reserves, according to the EIA.
When will diesel prices go down?
In January, the EIA predicted that gas and diesel fuel prices would go down this year and in 2025.
More specifically, the EIA projected the average cost of a gallon of diesel fuel would be $3.92 this year, down from $4.21 in 2023 and $4.99 in 2022.
So far, the average cost of a gallon of diesel for the first four months of 2024 is $3.96, according to EIA data. A gallon of diesel cost $3.61, on average, as of May 13.
Those lower fuel prices should be driven by a larger supply of diesel, thanks to greater capacity at U.S. refineries, according to the EIA. However, demand for diesel is expected to increase slightly this year. That would offset falling prices somewhat.
Still, the EIA forecasted the annual average cost of diesel fuel to decline further in 2025 — to $3.85 per gallon.
