Fuel flip-flop: Gasoline prices may top diesel this summer
Apr 15th 2009 3:00PM
Updated Dec 4th 2009 12:58PM
Its been said that it would never happen, but this summer it may cause motorists do a double-take at the gas pump.
For relatively low gasoline prices? No, U.S. motorists generally expect gas prices to remain in a comfortable (but not cheap) range.
This summer diesel fuel prices may drop below gasoline prices. Currently, regular unleaded averages about $2.05 per gallon, according to a gasbuddy.com survey. Meanwhile, diesel prices currently average about $2.23 per gallon, according to the U.S. Energy Information Administration.
Diesel: More expensive, generally
Oil industry analysts say diesel is not supposed to cost less than gasoline. For one thing, diesel generally results in a 20 to 40 percent increase in fuel efficiency, which historically has helped justify its higher price. Second, in most regions of the United States, diesel is less available is than gasoline.
This, among other factors, has led to a price premium for diesel, historically. For example, in the frenetic U.S. vehicle fuel market of the summer of 2008, diesel exceed $4.70 per gallon, while gasoline topped out at around $4.05 to $4.15 per gallon, according to U.S. EIA data.
Why the price flip-flop?
However, this summer a convergence of factors may very well send gasoline prices above diesel prices. Of course, that's good news for those Americans who drive diesel vehicles, but a source of consternation for those who drive gasoline-based vehicles: they're supposed to be getting the lower-cost fuel.
First, demand for diesel -- the fuel that most tracker-trailer trucks use -- is down globally, due to the recession. That's creating excess supply, which is pressuring margins. That likely means weak diesel prices throughout the summer. Conversely, gasoline demand, while not rising in the United States due to motorists' belt-tightening, is still likely to support prices this summer -- a period when many Americans drive more as they enjoy outdoor activities and take vacations.
Second, during the warmer months, refineries switch to mandated cleaner -- but more expensive -- summer gasoline blends. It's called RFG, reformulated gasoline, and emits considerably less pollution. That fact, combined with the patchwork system of RFG blends required to meet the states' varying local pollution restrictions, reduces refiners' capacity to make other fuels, and this has caused price spikes, even temporary shortages, in the past. Hence, this summer, the price of gasoline may exceed diesel in some regions of the country.
Gasoline/Diesel Analysis: Diesel, the primary vehicle fuel of Europe, has a spotty history in the United States. Diesel has been the staple fuel for commercial trucks and buses for decades in the U.S., but it has never really caught on as a automobile fuel. That, in part, is due to the first, abysmal round of U.S.-manufactured diesel cars in the 1970s. The cars were very dirty, and there were so many operational problems that Americans shunned them. (Americans also like the wider availability of gasoline.) While today's diesels are substantially cleaner and more-reliable than their 1970s brethren, Americans are still not flocking to them.