Why Is Diesel Higher?

I heard this question one too many times, so I thought I'd do 10 seconds of looking on the net for a more detailed answer than what I was sure I'd find. "Supply/Demand and a bunch of Government messing things up -- same as always!".

Here is the US Energy Information Administration site answer:

Question: Why are diesel fuel prices higher than gasoline prices?

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Historically, the average price of on-highway diesel fuel was usually lower than or close to the price of regular gasoline. In some cold winters demand for distillate heating oil pushed diesel fuel prices higher. Since September 2004, diesel prices have been higher than regular gasoline prices almost continuously for several reasons:
	High worldwide demand for diesel fuel and other distillate fuel oils, especially in Europe, China, India and the United States, and a tight global refining capacity available to meet demand.
	The transition to lower-sulfur diesel fuels in the United States is affecting diesel fuel production and distribution costs.
	The Federal excise tax on on-highway diesel fuel is 6 cents per gallon higher (at 24.4 cents/gallon) than the tax on gasoline.

So, the more detailed answer is:

1. Supply USED to be higher than demand for diesel relative to gas, so especially in countries where fuel prices were artificially high due to government intervention (Europe), or refining capacity was limited or simplistic (India, China), more vehicles were purchased that burned diesel. More vehicles means more demand, so the demand for diesel went up and now the situation is reversed. Sadly, for those folks that invested in diesel engines, the engines are a lot more expensive, so that demand tends to be INELASTIC ( a technical economic term that is basically "sticky". Cigarette demand is the classic "inelastic demand" -- people tend to keep buying even when you raise the price). When you have inelastic demand, producers can make more profit--at the risk of getting more competition, but see other factors.
   
2. The US has regulations pushing us to low sulfur diesel which will be even MORE expensive! While we are in the process of switching, there tend to be spot shortages that drive the price up even more.
   
3. We are short on refining capacity - mainly due to pollution controls and government making threats of what regulations "might be". Sometimes the media talks about "80% capacity", but that is very much a red herring. Most plants can't even run at 100% in any case (do you run your car wide open? If you did, how efficient do you think that would be?), and among the things limiting the capacity are regulations on pollution, hours of operation, etc.
   
4. We tax diesel more -- a built in 5% "premium" for diesel thanks to uncle means that everyone down the line from refiner to pump tends to go for their own "premium" -- more like .x%, but there are more of them than there are of the big fed, so it adds up.
   

Why isn't this of interest to a newspaper? It seems very easy to look up and a lot of people seem interested? Here is why:

1. Pollution controls are supposed to be FREE -- these facts give the lie to that, papers don't like to report that kind of information. It might make people question the costs of a bunch of regulations that the Democrats and the MSM want.
   
2. The MSM believes that government intervention is "beneficial AND free (or at least "cheap/worth it"). That is what the MSM believes, but what we see in the real world is the government intervention tends to be costly and harmful. The MSM likes to report what they believe, not what is, so there isn't much reason to report this. That would be like doing a bunch of reports on a late spring, record COLD temps, less hurricanes than expected, etc. They don't talk about that in the MSM, just hot temps.
   
3. Supply and Demand are working -- and that isn't a view that the MSM really likes either. When Europe jacked the prices on gas, the people started to use more diesel, which in turn has jacked the demand on diesel. Much better to let folks assume it is some Oil Company Conspiracy, failure of the Bush administration, or just about anything else than what it actually is.
   

This is a pretty classic case of what the MSM likes. "Ignorance for the sheep is bliss". It would be EASY to report these facts and it would even be INTERESTING, but of course smart sheep aren't the kind that are likely to follow the MSM and vote for Obama! Better keep that wool over their eyes!