Currently, diesel is more expensive that gasoline (although I seem to recall that it was cheaper when I was a kid). Why is this? I understand it’s easier to process oil into diesel. I know supply and demand factor into that, but increased demand ought to lead to increases in supply.
Thanks,
Rob
Increased supply? As far as I know, the quantity of diesel produced per barrel of crude is pretty close to constant, as is the quantity of gasoline per barrel. (At least, not without extensive catalytic reforming.)
So, to increase diesel supplies, you pretty much have to simultaneously increase gasoline supplies by processing more crude, depressing its price simultaneously, maintaining the price premium of diesel over gasoline.
That’s simplistic, but that’s how it seems to me.
Diesel is apparently in higher demand relative to gasoline nowadays than it used to be, so its price will be commensurately higher. “What the market will bear.” Genius of the market, I guess.
Part of it is due to the requirement for low sulfur diesel, which drives up the production costs. Since other countries don’t have this requirement, it also means that low-sulfur diesel is produced in smaller quantities (only for the U.S.), which factors into the supply and demand sort of thing.
Another chunk of it is due to taxes. Diesel and home heating oil are pretty much the same thing, yet diesel costs a lot more due to the heavier taxes on it. The taxes for diesel are also higher than the taxes on gasoline, since diesel is mostly used by large vehicles which cause more damage to the roads, so the government taxes them more to make up for it.
Part of it is just supply and demand. When the price of oil goes up, folks who drive cars cut down on their trips to save money. Folks to drive trucks for a living still have to deliver their shipments. So the price of gasoline drops due to the lower demand, but the price of diesel doesn’t.
Worldwide demand for diesel is increasing, due to China and India, and the fact that due largely to tax reasons, diesel has been cheaper in Europe, leading to a significantly larger percentage of cars being diesel over there. More demand for everywhere else means less supply available for the U.S.
So a lot of things factor into it.
5-6 ¢ of the difference is due to tax.
Just to add to this:
Diesel has become very popular in Europe over the last five-six years, as the Governments generally have taxed it more lightly than gasoline, due to lesser CO2 emissions. This will probably revert in a big way over the next couple of years, as European governments realize it is far worse for NOx emissions (local vs. global pollution), and hence the tax breaks for Diesel cars and fuel will probably be removed, maybe even reversed. This might very well lessen the demand for Diesel fuel world wide and maybe lead to decreased prices elsewhere.
BTW - is there something to the old adage that Diesel cars are generally more efficient than gasoline cars, and as such Diesel fuel is more cheap when you consider the mpg equation, than by comparing it directly by the pump price with gasoline?
Sorta.
Diesel engines, due to their higher compression ratios and lean combustion, convert more of the energy into motion and less of the energy into waste heat than a gasoline engine does. Diesels have a narrower operating range, though. So what this means overall is that for long distance highway driving, diesels have always had a big advantage. Around town, not so much.
That said, there have been a lot of improvements in the last couple of decades to gasoline engines. This isn’t my area of expertise, but it’s my understanding that diesels are still a bit more efficient for highway use, but the gap is much narrower now than it used to be.
There are also higher initial costs in manufacturing, and in maintenance that make diesels more expensive to operate than would be indicated by the improvement in combustion->work efficiency. The overall comparison of operating costs are so close between diesel and gasoline automobiles that neither side can claim a real economic advantage. However, I’m not convinced that gasoline engines aren’t simply benefitting from the economy of scale. Many more engines, fuel, lubricant, and parts are manufactured for gasoline engines, and many more mechanics are trained and equipped to maintain gasoline engines. If the demand were equal for the two types of products, the advantage might swing clearly toward diesel.
I know someone who has a BMW X3 - a fairly large, heavy SUV with a 3 liter diesel engine. This vehicle get better mileage than my 1.6 liter Suzuki econobox. And it’s much faster.
Are you European? You don’t sound it. It’s been popular for the last twenty years at least.
There are no meaningful tax brakes for diesel cars that I am aware of. The big thing has been the greater mpg. Simple as.
In most (if not all) of the European countries I drove through on my last holidays, diesel was cheaper than petrol.
And yes, for a given engine size diesels tend to be more economical and have better grunt.
e.g. My little Skoda Yeti, fully loaded with family and luggage averaged 55mpg on a 2000 mile round trip to Austria… It is a 1.6 turbo diesel with all sorts of hi tech bells and whistles and was far easier to drive over the Grossglockner mountain road than my previous 2.0 petrol car. (which averaged 37mpg for an equivalent trip the previous year)
Yes diesel is (much) cheaper than gas… actual gas (LPG, do you guys even have that in the US?) is cheaper still. In Holland you pay more road tax for Diesel/LPG cars and it is in general considered only a smart buy if you are on the road a lot. At this point the price for normal gas is E1,89/liter and for diesel E1,53/liter (E7,18 and E5,81 a gallon respectively).
Well, Norwegian, so not really European (in the sense of actually joining the market and all that) 
- My five-six years and tax brakes was probably more related to Norway, as the Government here really dropped the tax on Diesel cars to make people switch. And now they’re considering recanting those tax brakes, leaving people who’ve bought Diesel cars in that timeframe rather miffed…
Altough, I thought this had been a more general trend throughout Europe based on what I’ve read in the media, but I might very well be wrong on that.
In Spain it seemed to be simply “diesel is cheaper”; the cars themselves used to be more expensive but I’ve been windowshopping and now they’re the same price, at least for small models. The taxes are the same.
As to the OP’s question, the most basic answer is that worldwide demand for diesel fuel has been increasing at a faster rate than the demand for gasoline. Since without some very expensive refinery modifications, the amount of diesel and gasoline you get out of a barrel of oil is at a fixed ratio, the pre-tax price of diesel naturally rose faster than the price of pre-tax gasoline.
The UK taxes gasoline & diesel the same per liter, but has hefty yearly registration/road taxes based on a car’s CO2 output, which is of course directly tied to its fuel economy, weighted by the carbon output of the fuel it uses; thus diesel cars usually end up costing less tax wise, since their greater fuel economy overcomes the higher carbon content of diesel fuel.
Other countries in Europe choose to tax diesel less - in Germany, for example, the fuel taxes are €0.4704 per liter for ultra-low sulfur Diesel and €0.6545 per liter for conventional unleaded petrol, plus Value Added Tax (19%) on the fuel itself and the fuel tax.
As for why diesel cars haven’t caught on in the US, aside from some truly awful diesel cars in the '80s leaving people with bad memories, the US (especially in the CARB states) has much stricter laws on nitrogen oxide emissions than the European Union - right now the Euros let diesel vehicles release about 6 times as much NOX per km as the CARB regs do; even the Euro 6 emissions laws that become effective two years from now will let diesels produce almost 3 times as much NOX as the current CARB rules. Info obtained from DieselNet: Engine Emission Standards ; note that US standards are in grams per MILE (USA, Y U MIX METRIC AND STANDARD UNITS?) , while everybody else uses grams per KILOMETER, so be prepared to convert things.
Making a car that can meet the US’s stricter rules costs more, and reduces the fuel economy. The Jetta TDI is rated at 30 city/42 highway/34 combined mpg on the US fuel economy test, while all the latest similar sized gasoline cars (Focus, Elantra, Mazda 3, Cruze Eco, Civic, Dart, ect) are nipping at its heels, at least on the official government tests, while costing thousands of dollars less.
Granted most people claim to get better fuel economy than the tests indicate for diesel vehicles - on fueleconomy.gov, user reports claim to get 39.7 mpg for the 2012 Jetta TDI; they also claim to get 32 mpg for the 2012 Ford Focus, 1 mpg higher than its combined fuel economy rating. Those are the numbers I am going to use for the next comparison.
Checking cars.com, I can get a new Focus SEL (second highest trim level, stripped out models start at $15k) for $18,500 on a dealer lot near me right now. The cheapest Jetta TDI with an automatic transmission is $23,800. So a $5,300 price difference. According to AAA, the average cost of diesel fuel is $4.11 in the US, and gasoline is $3.82; so the Focus costs 11.9 cents per miles to drive, and the Jetta TDI cost 10.35 cents per mile. So, a 1.55 cent difference per mile. So you need to drive 392 thousand miles before the diesel car saves money. Even if the Jetta TDI got 45 mpg & the Focus got 30 mpg, it would still be almost a 150 thousand miles for the Jetta TDI was the cheaper choice. Granted this comparison ignores the cost of maintenance & the cost of depreciation, which will be different for both cars.
This is a critical factor in the euro/US MPG difference for diesels. Higher NOx output is associated with higher combustion temperatures. One way to reduce peak combustion temperatures in a diesel engine is to retard fuel injection so that ignition/combustion happens a little later in the expansion stroke. However, this also reduces efficiency because some of the expansion stroke has already occurred before you’ve released the fuel’s energy; less of that energy gets converted to mechanical work, and more of it gets dumped out with the exhaust.
There was some controversy maybe 10-15 years ago when a major truck engine manufacturer had programmed their engine ECU’s to recognize when they were being driven on a standard EPA test, and retard the fuel injection under those circumstances so as to limit NOx output and pass the test. When the ECU saw certain other driving conditions (e.g. steady state highway cruise for more than a certain amount of time), it advanced the injection timing to improve fuel economy, causing heinous NOx output. IIRC the manufacturer was hit with a big fine when the EPA discovered this.
Part of the story regarding E-85 fuel in flex-fuel spark ignition vehicles is that while E-85 is often cheaper than regular gasoline when priced by the gallon, E-85 often gets lower mileage.
Hmm I always thought it’s because diesel has more energy per volume http://www.jatrofuels.com/170-0-Calorific+Values.html
37-38 MJ/liter vs 32-35.