Four Factors Contribute To Diesel Pricing.

As gasoline prices continue to fall, many analysts hope that diesel will follow suit. Unfortunately, multiple factors continue to contribute to the high costs the trucking, transportation and education industries continue to encounter. Here’s a breakdown of critical factors that affect the price of diesel:

  • The price of crude oil
  • Costs and profits related to refining
  • Expenses and profits related to distribution and marketing
  • Taxes

Diesel Pricing Is High & There Are Plenty of Reasons Why.

The price of crude oil is the number one factor affecting the price of diesel. Several elements at play contribute to higher crude oil prices in 2022.

  • The War in Ukraine: When Russia invaded Ukraine in February 2022, President Biden banned the purchase of oil from Russia, a major global provider. That ban alone halted the sale of 700,000 barrels of diesel and other fuels a day.
  • Closing Refineries: In 2019, a fire shut down Philadelphia Energy Solutions, one of the Northeast’s most critical producers. Additionally, the New York Times reported that 5% of U.S. and 6% of European refineries have closed or scaled back production due to the COVID-19 pandemic.
  • Increased Usage: In 2020, the International Maritime Organization started requiring ocean-worthy ships to use a less-polluting fuel than the high-sulfur bunker fuel standard on most ships. Many fleets converted to diesel, driving up demand and pricing.

Don’t Worry; There’s Still Hope.

You might be wondering if there’s any hope for less expensive diesel. There is! In recent months, China has doubled exports, sending most to Europe, which helps satisfy demand and creates supply avenues for the U.S. market. China and Kuwait are building additional refineries to beef up production and take advantage of increased demand. Those refineries should help to lower pricing for the U.S. market. Current expectations show those plants operational in 2023. If you have other questions about the cost and supply of diesel, please feel free to contact our experienced team.

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