In the past month, gas prices have dipped lower than they have in ten years, leaving average, working class Americans with a few more bucks in their pocket. There are a few reasons why this drop has happened (one being that the United States has increased production), but essentially it all comes down to basic supply and demand.
With the increased production of more fuel efficient vehicles, as well as economic slowdowns in Europe and Asia, crude oil is in lesser demand, driving down the price to $60 a barrel for the first time in five years.
The answer… once again, SUPPLY AND DEMAND
“For many years, diesel has been cheaper than gasoline at the pump — which is why so many readers are puzzled by the recent flip-flop,” writes John W. Schoen of NBC. “There’s little difference in the cost of making the two fuels. But while the basic problem remains supply and demand, each of these fuels marches to a different market drummer. And there are a bunch of forces on each side of the supply-demand balance that have combined to make life miserable for diesel buyers.”
Currently, the difference between diesel and gas prices has astonishingly hit upwards of a dollar per gallon in certain regions, hurting business owners and truck drivers alike. Some of the major issues driving up the demand and consequentially the price of diesel include:
- A sustained and even increased demand for diesel in developing countries that need big machinery for construction and growth. Contrast this with more and more countries shifting to fuel efficient vehicles and you can see why the gap in price is growing.
- Another huge factor in the price differential is that the federal tax on diesel fuel is 6 cents more per gallon than gasoline– 24.4 cents vs. 18.4 cents.
- An improved U.S. economy. Typically, a better economy is great but when it comes to diesel fuel prices, it’s the exact opposite. Jim Ritterbusch, president of Ritterbusch & Associates– an oil trading and advisory firm in Chicago– says,”This year, demand within the U.S. for diesel has been much stronger than for gasoline. [That’s partially due to the U.S. economy’s growth and] the increased truck traffic that goes along with that.”
For truck lovers and owner/operators, this all adds up to more of the same– high prices at the pump. But hey, it’s not like the prices have been cheap lately, anyway. It’d just be nice if there was some relief on that front.