Diesel prices top gas by 56 cents a gallon nationally

Jan. 20, 2014
Diesel has become more expensive than gas, and that all but eliminates the savings from diesel's generally higher efficiency over gasoline.

Diesel fuel was once a less-expensive alternative to gasoline, but the roles have reversed in recent years. Diesel has become more expensive than gas, and that all but eliminates the savings from diesel's generally higher efficiency over gasoline.

The situation stems from factors including increased worldwide demand, bitter cold weather and an improving global economy, petroleum market-watchers say, and it has implications for anything that is shipped by truck or rail.

In other words, just about everything.

"(Diesel) is a big deal," said Jim Ritterbusch, an oil market industry analyst in Galena, Ill.

Across the United States on Friday, a gallon of diesel fuel cost $3.86, according to the AAA Daily Fuel Gauge Report. A gallon of gasoline was 56 cents cheaper at $3.30 a gallon. In Wisconsin, the difference was even bigger, with gasoline matching the national average price while diesel was averaging $3.91.

Consumers are increasingly paying attention.

"There are a lot more customers nowadays who weigh the pros and cons" of diesel vs. gasoline, said Brad Baker, a sales representative at Badger Truck Center in Milwaukee. "(Diesel) costs more. It never used to.

"More and more people are putting a pencil to it and saying, 'I can get by with a gasoline engine,'" he added. "We've gone through this conversation quite a bit the last three or four years for sure -- more than we used to.

"It's something we deal with every day."

There are nearly 50,000 light-duty diesel vehicles -- cars, SUVs and light trucks -- in Wisconsin, according to dieselforum.org, a trade association for companies that manufacture diesel-powered products.

Diesel vehicles are 30 percent to 35 percent more fuel efficient than gasoline-powered vehicles, according to fueleconomy.gov.

Right now, though, "All the gains you scoop up with the much better mileage, you are losing on the pump price," Ritterbusch said.

Higher global demand

Global demand for diesel is among the factors driving prices higher, with U.S. refineries often exporting the fuel wherever in the world it can fetch the best price. As Europe emerges from recession and developing countries in Asia and Latin America have continued to grow, so has demand for diesel.

"Diesel exports have probably quadrupled in the past three or four years," Ritterbusch said. "It's almost a situation where gasoline has become a byproduct of this quest to produce diesel, load it on cargo ships and ship it out."

The U.S. exports about 3.5 times as much diesel as gasoline.

Ritterbusch said he's seen instances of diesel being shipped as far away as Asia.

Meanwhile, soaring heating oil use amid bitter cold temperatures this winter in the U.S. also has affected diesel, Ritterbusch said. Among refined crude oil products, heating oil is closely related to diesel fuel, and soaring home heating demands -- especially on the East Coast -- have led to higher prices.

"Diesel fuel is the pre-eminent fuel in the world now," said DuWayne Marshall, an independent trucker from Watertown. "When I started trucking, diesel was probably 20 cents a gallon cheaper than gasoline. But it's been on a steady climb since probably the late 1980s."

It's been worse. Diesel has fallen from its highest prices touched in 2008, he said, and it costs about $800 to fill his truck these days, compared with $1,000 a few years back.

He follows prices carefully. "I put a lot of thought into it," he said. "I have to watch my price per gallon."

As in other trucking and shipping businesses, fuel prices have forced Marshall to add fuel surcharges to every load he hauls.

The surcharges slide up or down depending on the cost of fuel.

American consumers ultimately pay those costs.

"The consumer bears much of the increase during a spike, and they receive the benefit of a drop in prices as well," said Dan McMackin, a spokesman for Atlanta-based UPS.

Volatility

The price increase also is part of a pattern that has seen volatile price swings occurring regularly in petroleum markets.

"I've been here 28 years, and in the early years, fuel was very predictable and rarely moved," said Tim Kreilkamp, one of the family co-owners of Kreilkamp Trucking in Allenton. "It moved pennies one way or the other, but it seems since 2004 when the ultra-low-sulfur diesel was introduced, the cost increased over gasoline and the volatility rose."

Changes in emissions standards also have affected diesel.

"The fuel economy isn't as good as it used to be because of all the emissions equipment that has been added," Baker said. "That's added to the cost of an engine, and the mileage has decreased."

But the cleaner aspects of diesel also have made it more popular, which increases its demand.

"It's becoming a very, very clean product," Ritterbusch said. Gone are the days when diesel cars belched acrid exhaust from their tailpipes. "It was so dirty, the bumpers would turn black. You don't see that anymore."

And, despite the higher pump costs, diesel vehicles offer advantages, especially when heavy loads need to be hauled, Baker said.

"If you are pulling a decent-size backhoe every day, then yeah, there's no question," Baker said. "You need that low-end torque that diesel offers in order to get that load going.

"Then it doesn't matter how much it costs because that's what you have to have."

Going forward, Ritterbusch expects diesel prices to remain steady.

"It's the old good news-bad news situation," he said. "The good news is they aren't going to go higher. The bad news is we're not going to see much of a price downdraft."

Dish on diesel

  • Nearly 50,000 light-duty diesel vehicles in the state of Wisconsin.
  • In Wisconsin, a gallon of diesel costs about 60 cents more than a gallon of gas.
  • Diesel engines are 30 percent more fuel efficient than similar-size gas engines.

Copyright 2014 - Milwaukee Journal Sentinel

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