I’ve noticed this for as long as I’ve cared about gas prices but am only now getting around to asking, so I’m not specifically talking about any one period of time. Why are diesel prices seemingly so divorced from unleaded prices? I understand the concept of a price difference, but sometimes that price difference is $1 or $1.50, sometimes it’s 50 cents, and I’ve even seen the rare example where it’s cheaper than unleaded. Are the same forces acting on unleaded prices not acting on diesel? Why are they so independent of each other?
EDIT: I should specify that my experience is in the USA. It seems prices track much more closely in the EU/UK.
In: Economics
Both diesel and gasoline come from oil. There is no way to just make one or the other. But at any given time there is a different amount of demand for one or the other. So whenever you are making enough gasoline to fully fill the demand, you might not be making enough diesel to fully fill the demand.
Gasoline = demand from people driving their personal vehicles
Diesel = demand from industry moving goods or operatig machienary
For example, I live in an agricultural area of the country. Diesel prices rise around harvest time when farmers are running tractors and hauling their grain to market. Gasoline prices rise around the holidays when people are driving around do visit aunt Dorthy 6 hours away.
Different supply/demand patterns than gasoline, differences in fuel taxation compared to gasoline. For example, during COVID lockdowns people drove a lot less, but trucks were still needed to distribute goods.
Looking at it from a North American perspective, sure and it’s been that way since about 2008. Prior to that it was fairly common for diesel to be lower in cost than gas due to EPA mandated changes in diesel fuel that increased production costs. From the EU perspective…diesel and gasoline are much more closely priced and tend to be much more stable (primary due to a much higher percentage of smaller diesel vehicles such as pickups, sedans, vans, etc).
The primary reason why they aren’t synced in the US though as to do with the demand for the fuel. Most people in the US own vehicles with gasoline engines but at one point or another everything you own (including your car) was brought to you by a diesel engine. So when gas prices go up because people are going on vacation or driving it doesn’t always line up with increases in shipping or increased demand for heating oil. But also keep in mind, diesel doesn’t always dictate the shipping costs as heavily as one might think because of the core beauty of diesel engines…they can burn a much wider range of fuels compared to gasoline engines. As an example, many shipping vessels switch fuels over to much cheaper bunker oil once in international waters. Most US military diesel engines are what is called multi-fuel engines and can even burn gasoline but typically get filled up with jet fuel.
Diesel, heating oil, jet fuels and kerosene are Middle Distilates and are refined diferently than gasolines. The pricing starts with how these products are traded on the worlds trading floors like the Nymex along with their local, international and and seasonal demands along with refining and shipping capacity.
Going back to 2003 at least, they track very closely:
https://www.racfoundation.org/data/uk-pump-prices-over-time
UK data, perhaps it is different elsewhere .
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