Blue truck refueling with the driver holding the dispense handle

While still crazy-high, gasoline prices are slowly coming down, but diesel remains stubbornly high…more than $2/gallon higher than last year and more than $1/gallon above gasoline prices.

Why is that?

For three main reasons:

  1. Beginning in 2006, the Environmental Protection Agency (EPA) began phasing in requirements to reduce the sulfur content of diesel. The current ultra-low sulfur diesel regulation has benefits to the environment but also increases the production costs and reduces fuel efficiency.
  2. The taxes on diesel are higher. On average more than $0.075/gallon higher.

Simple supply/demand economics. On the demand side, the nation’s transportation, industrial and agriculture sectors run on diesel. On the supply side, each barrel of oil produces 19-20 gallons of gasoline and only 11-12 gallons of diesel.

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