Quote Originally Posted by Ozme52 View Post
Yes, I don't quite understand why it inverted... but diesel seems to be consistently costing about 60 cents a gallon more than octane 87 gasoline.
Smoke and Mirrors: Why Are U.S. Diesel Prices So High?

With me being a professional automotive journalist and all, Ted Haberkorn figured I was just the man to answer his question.

Ted Haberkorn was mistaken. He should have just asked me about quantum physics in Farsi.

Here's what's on Ted Haberkorn's mind: In his 81 years, Ted has owned, by actual count, 42 vehicles, some of them diesels. Ted likes diesels. He drove a couple of Mercedes-Benz diesels, and right now, he drives a diesel-powered Dodge Ram Quad Cab pickup. Which is cool: When I'm 81, I'll be lucky if I can drive a Rascal.

Anyway, Ted Haberkorn doesn't understand why a gallon of diesel fuel costs more — considerably more — than a gallon of regular gasoline, when not that long ago, diesel was substantially cheaper than regular gas.

How much more? "I've paid 40, 50, even 60 cents more per gallon," he says. "What's going on?" he asks.

I've wondered the same thing. "Lots of people have wondered the same thing," says Allen Schaeffer, executive director of the Diesel Technology Forum, an information clearinghouse backed mostly by car and truck manufacturers, as well as a fuel company or two.

No easy answer
Unfortunately, Schaeffer says, there is no easy answer. Part of the most recent price hike is traceable to the Gulf of Mexico hurricanes disrupting refineries, oil wells and fuel shipments. The hurricanes were "a burp in a system that has very little room to deal with burps," Schaeffer says. When the refineries went back online, they concentrated on producing the product with the greatest demand, which was gasoline.

But there's more, he says. This time of year, an increase in the demand for heating oil raises the competition for crude, which raises the prices.

Another factor: Global demand for diesel is increasing. In some European countries, more than half the cars have diesel engines.

Still another factor: Refineries are gearing up to manufacture a new, cleaner diesel fuel, due to hit the market in less than a year. The goal of "clean diesel" is to virtually eliminate sulfur from diesel fuel. Lower-sulfur fuel is cleaner on its own, but its main purpose is to make it easier for engine manufacturers to filter pollution out of the exhaust after the fuel is burned. Ultralow sulfur fuel is supposed to be available nationwide beginning in the fall of 2006.

Schaeffer says that, yes, this process will raise the price of diesel fuel even more per gallon, possibly between 4 and 7 cents. But he also speculates that some small portion of the recent record-high diesel prices might be invested by refineries to produce this cleaner fuel.

Not so new
In October, the national average for a gallon of diesel fuel rose to a record $3.10. On August 29, diesel averaged 2 cents per gallon less than regular gas. On October 24, diesel averaged more than 55 cents per gallon more. But it has been rising for a long time. According to the federal government's Energy Information Administration (EIA) statistics, diesel has been gaining on regular gasoline from about 1994 to the fall of 2004, when, for the most part, diesel became more expensive.

Helpfully, the EIA offers a breakdown of that $3.10-a-gallon diesel from October: 16 percent of the $3.10 goes to taxes, 10 percent to distribution and marketing, 29 percent for refining, 45 percent for crude oil.

Compare that to the breakdown on a gallon of regular gas from October, which cost $2.72. Of that, 16 percent went to taxes, 18 percent to distribution and marketing, 15 percent to refining, 51 percent to crude oil.

Obviously, the biggest difference we see here is the refining cost, presumably because in this post-Hurricane Katrina atmosphere, most refineries still working were refining gasoline. But now that we are back to relatively normal, the difference in price between diesel and gasoline remains about the same.

The EIA has a helpful "Frequently Asked Questions" posting on its Web site that addresses the question, "Why are diesel prices so high?" To summarize the answer: Yada yada yada…distillate fuel production…lower than typical…heating oil…vote Republican…largest determinate for future path…yada yada, and, in conclusion, yada.

The light at the end of the tunnel is Willie Nelson
But there may be relief in sight, thanks to Willie Nelson. Willie is a backer of "BioWillie," a biodiesel fuel made from seeds and stems and probably soybeans. After all, Rudolph Diesel, who invented the engine, used to run his on peanut oil. Adding biodiesel to regular diesel might cut the cost per gallon. Or not. Anyway, Willie Nelson backs his own brand, BioWillie, which is sold at truck stops "all over the country," which means six places in Texas, and one each in California, Georgia and South Carolina, but if you log on to www.biowillie.com, you can buy a BioWillie computer mouse pad for $15.99.

I'm not sure any of this helps Ted Haberkorn. But this might: I asked a friend who is in the petroleum industry why they charge so much for diesel.

"Because we can," he said.

That, I understand.