It was only in recent years that diesel fuel prices soared above gas prices. These two fuel categories used to have different peak seasons, with gasoline prices enjoying greater primacy in pricing over longer months. Gasoline then had the biggest gap in prices from diesel fuel during the summer months, when demand for gasoline peaked as a result of families taking long drives across states. Meanwhile, diesel fuels scored higher prices during the winter months, when the demand for distilled heating oils used at home increases as well. This is because distilled heating oil and diesel fuels are refined in the same facility using the same process, causing the demand for diesel fuel and distilled heating oil to act in a parallel manner.
There are several basic elements that determine the worth of a gallon of diesel. About sixty percent of the cost of diesel reflects the price of crude oil, which is raw material for diesel production. Crude oil is purchased from oil producing countries and subsequently brought to refineries where the ultra-low sulfur diesel, among other petroleum products, is extracted. Given a barrel of crude, a refinery will be able to distill about one tenth of a barrel of diesel. Refining accounts for nearly twenty percent of diesel fuel cost.
The remaining elements of the cost of diesel fuel are government taxes and the expense of marketing and distribution. A ten percent excise tax is levied onto all fuel products that are manufactured in the country. Although foreign fuel avoids this, it is generally cheaper to buy locally refined fuel as import taxes generally translate to higher unit price. Marketing and distribution only makes up five percent of total diesel fuel cost, but this can often be the most volatile factor affecting the value of diesel fuel.
Basically, the price of everything is dependent on supply and demand. If supply is low and demand is high, prices will go up. If supply is plentiful, the price will stay steady, and may even decrease when demand wanes.
In the United States, most diesel fuel that is consumed is produced in their local refineries. Additionally, a small percentage of fuel is mainly imported from Canada and the Virgin Islands. From both local and imported crude oil, diesel fuel is manufactured by the local refineries and it is transported by pipeline from these refineries and ports to the terminals in proximity to the main consuming areas. Then it is put in tanker trucks for delivery to retail service stations.
Inclusive in the cost to manufacture and transport diesel fuel to the consumers are the costs of crude oil, refinery processing, marketing and distribution, and retail station operation. The costs and profits of the refiners, marketers, distributors, and retail station owners are reflected in the retail pump price. The comparative share of these cost components to the retail price varies over time and among the country's regions.
The price at the pump also is inclusive of federal, state, and local taxes. In other states, counties, and city governments levy additional taxes. Local market conditions and other factors such as the location and the marketing strategy of the owner are reflected in the retail price as well.The components of diesel fuel prices can be broken down into the following (from highest to lowest percentage): crude oil, refining, taxes, and distribution and marketing. Knowing this information will give the consumers a clearer picture why the prices are pegged at such and why they fluctuate.And can this rising prices cause a
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