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Diesel Prices Jump Higher than Gas

DETROIT -- With no apparent relief in sight, record-high diesel fuel prices threaten to become an even bigger thorn in the side of consumers heading into winter than gasoline, reported the Detroit Free Press.

Diesel prices have jumped 48 percent in a year from $1.49 per gallon to an average of $2.21 per gallon nationally, the U.S. Energy Information Agency reports. Meanwhile, December crude oil rose 63 cents to close at $55.17 per barrel Tuesday on the New York Mercantile Exchange. To date, crude oil futures are 80 percent higher than they were a year ago.

"Historically, high prices have been the wild card that have forced the consuming industry to look at alternative fuels and other ways to burn energy," said Ben Brockwell, director of pricing and information services at Oil Price Information Service, a Lakewood, N.J.-based petroleum industry tracker. "I think that's kind of where we are now."

Diesel is fuel made from crude oil that is often used to power heavy machinery, off-road engines and railroad locomotives, as well as some types of light trucks and cars. The sharply rising price for diesel fuel has gone largely unnoticed by most consumers, who have been worried about increases in gasoline prices and home heating oil. But an unseen tax on consumer goods is beginning to appear as a result of skyrocketing diesel prices.

The trucking and railroad industries, which depend heavily on diesel to power their rigs, have begun charging shippers surcharges due to the prices. With profit margins already thin -- 2 to 3 percent -- trucking and railroad companies are trying to offset costs by charging a per-mile surcharge.

About 75 percent of the 4 million barrels of diesel fuel consumed annually in the United States is used by trucking and other transportation industries, OPIS reports. The remainder of that fuel is used to produce heating oil, power railroad cars and fuel construction companies, among other things.

In addition, U.S. demand for diesel fuel has grown at a rate of nearly 6 percent in the last 18 months, compared to a growth rate of 1.8 percent for gasoline.

"It all comes down to supply and demand," Brockwell said. "Demand in many industrialized nations in Asia such as China, India and Thailand is growing at rates that rival that of the U.S. Worldwide, diesel fuel is much more in demand than motor gasoline."
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