Why does diesel fuel sell for a different price than regular gas?
Only 40% of a barrel of crude oil can be made into gasoline. The rest of the oil can be distilled into diesel/heating oil, heavy gas oil, lube oil, kerosene, naptha, and light gas. Diesel used to be substantially cheaper than gasoline, but increased use of tractor-trailers and train engines, which all run on diesel, has strained the available supply. Refineries can either optimize for gasoline or diesel production. Gasoline is a better profit center right now as the high-end production equipment that was installed about 10 years ago is finally turning in big profits. Refiners would have to invest billions to retrofit an existing gasoline line or build a diesel refinery and they will not do that as the short-term profit to investors would be at risk.
The primary reason diesel sells for a different price than regular gasoline is taxes. Gasoline is taxed at the point of use: the gas pump. Diesel is taxed differently depending on where you buy it, considering that many commerical trucks use diesel. Take note the next time you see a semi driving down the road to see the license plate. It may read – apportioned. What this means is the fuel taxes are equally apportioned according to the use of the vehicle across state lines. As you can guess, fuel taxes vary from state to state, so accordingly, diesel fuel prices will find a median value at the pump due to the fact that they are primarily regulated and sold with commercial use in mind. It makes no difference that you might buy it to put in your diesel vokswagen. Another reason diesel prices are different is that the fuel is not as costly to refine than gasoline due to the fact that it isn’t as heavily regulated regarding pollution standards.
