DR2000

My current 2014 ML350 BlueTEC is my first diesel car ever. My main reason to get diesel was the fact that it can go a long range on a tank of gas and the torque it provides. Some money savings would be an added bonus, but that doesn't seem to be panning out to be the case.

I took delivery of my car at the end of November (2 and half months now) and I am noticing a high spike in prices.

A local gas stations went from $4.07 per gallon to $4.39. A gas station on I-95 went from $4.11 to $4.49. I notice that gas prices actually went down a bit.

Is this a winter thing? Or why has diesel pricing has jumped up so much in the last 2 months?

Just curios to find out on how the economics of all that works.

N_Jay

Cold winters use more heating oil, competing with road diesel for production capacity.


Also, I think winter diesel costs a bit more due to additives.


Others want to pontificate?

DR2000

But wouldn't that have the same effect on gas? Yet prices stayed the same or even dropped a little.

mtrevelino

For the past year in Virginia, I have paid a low of $3.51 during May, a high of $3.91 during April, and am currently averaging $3.73.
Mike T.

N_Jay

Diesel and Heating oil share a lot more in terms of resources and production capacity than Oil and Gasoline. (At least my understanding)

dgiturbo

Price gouging. That's all. And they can get away with it.
The very small minority of folks that drive diesel powered commuters have no "voice".
The truckers will pass the price on to the consumer, the airlines will charge more, heating oil companies will raise prices and those running plows won't care cause they are enjoying this profitable season.
We just have to "embrace the suck."

But don't worry, I have noticed that whatever diesel prices go to in winter, by summer reg gas is higher as gassers start to take summer road trips.

N_Jay

Nope, if that was the case it would be all the time (until someone decided to take the volume by coming in under the gougers.


Retail fuels (not including tax distortion) is probably one of the best functioning examples of a "free market".


It is always easier to assume a conspiracy then to understand the market.

dgiturbo

So why then retail prices going up when crude ($97 today) and Brent ($107) oil prices are lower? Why always during winter, and higher if winter is colder? And it is all the time. Diesel is higher right after Thanksgiving due to weather, shipping and travel, and gas higher in the summer with road trips. All this while crude prices remain stable or move opposite to the commodity.

Incidentally, the only time "they" have been caught is right after a hurricane and the very large retail gas market cries foul to their government. Then suddenly gas retail prices drop.

N_Jay

Because crude prices are only one factor in the market.

Because another factor is aggregate demand for fuels sharing resources. The greater the alignment of shared resources, the greater the impact of demand for one on the supply of the other (and hence the price).
Colder weather demands greater amounts of heating oil (a product very close in the production chain to Diesel fuel)

Mostly due to the supply of heating fuel in preparation for winter. November is when most people refill their systems.

Crude is very close to a perfect commodity (with small distortions for type and location.), but as stated earlier, the cost of crude is only one factor.

Yes, at the local level during very unusual market conditions retailers have been accused of "Gauging". Of course, during these times, the retailer also did not know when his next resupply would be so (And supply availability, or risk of unavailability is a significant and valid factor in pricing.)

Find a local gas station owner, buy him a beer and ask him how he determines his prices. Then throw a few "situations" into the mix, such as; "If the refinery he normally is supplied by has a fire, and he is unsure of his next weeks allotment, what would he do?"

Remember, you are talking to a local small businessperson with no interest in making money for "big oil".
It is educational.

ImInPA

+1 on price gouging. If you include the fact that diesel is much less expensive to refine than gasoline, "rape" may better describe it.

I have been driving diesels for twenty years. Until 2001, diesel was always significantly less expensive than regular gasoline. But, even with the huge government subsidies we pay these oil companies, they still rape the consumer.

N_Jay

How big are those subsidies? (Per gallon)


I love how people would rather believe in conspiracies than learn the truth.


1) Diesel (And #2 in general) has an increasing worldwide demand, out pacing that of gasoline.
2) Diesels is taxes higher than gasoline.
3) Clean diesel has lost most of its production cost efficiency over gasoline.

u001elg

To answer DR2000 initial question...

Yes, this is a "winter thing".

You will notice a distinct rise in price over the winter , more so during severe cold, and a price lowering during the summer.

As alluded to by several of the other posters, the demand is greater for a limited supply in the winter and the price follows.

This can been even more clearly demonstrated with propane.. during the summer when the demand is low (the only real use is for outdoor grills) the price is low. During the winter when it is also used as a heating fuel the price rises dramatically as stored supplies are depleted.

Since propane is a byproduct of either natural gas extraction (a waste that condenses in pipelines) or crude oil fractionation (one of the lightest components that is also considered a waste product): It is stored throughout the year as this "waste" is removed from the above sources and accumulates. This is why after a particularly mild winter the propane suppliers will fill up residential customers tanks just to make room for their storage over the summer. The propane industry cannot just gear up and make more...

The other factor that comes into play is there are no large scale propane "pipelines" to move the product where it is needed. So most propane shortages are regional - i.e. there is overall plenty of supply country wide, just not where it is really needed at the time. All propane must be shipped via rail or truck to replenish supplies that are being challenged. The cost of this unscheduled transportation also drives up the cost to the consumer.

Back to the original point; even with large scale pipelines and relatively stable supplies of crude oil, the refined product (#2 fuel oil) fluctuates with demand and as supplies lower due to greater demand the prices rise. If we are unlucky enough to have a few refinery problems the supply falls even more and pricing goes up even more.

ImInPA

Speaking of truth, non one of your examples is either truthful or factual. Why is diesel more expensive than gasoline ONLY in the US? Kool-Aid does taste yummie, yes?

michael61

Taxes are a big part of it:

http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States
Also see: http://en.wikipedia.org/wiki/Gasoline_and_diesel_usage_and_pricing


Also, we have it good here vs. europe:

Retail Premium Gasoline Prices, Selected Countries (U.S. dollars per gallon, including taxes)
Date Belgium France Germany Italy Netherlands UK US
02/03/14 7.79 7.67 7.84 8.78 8.63 7.99 3.65
01/27/14 7.90 7.74 7.91 8.88 8.73 8.09 3.65

Retail Diesel Prices, Selected Countries (U.S. dollars per gallon, including taxes)
Date Belgium France Germany Italy Netherlands UK US
02/03/14 7.00 6.79 7.08 8.39 7.31 8.48 3.95
01/27/14 7.08 6.85 7.14 8.48 7.38 8.59 3.90

from: http://www.eia.gov/countries/data.cfm

N_Jay

Do you have a link or 2?


http://www.nacsonline.com/YourBusine...-Gasoline.aspx


http://blog.gasbuddy.com/posts/Why-d...85481-832.aspx

Shadow5501

Um, because in other countries the cost of fuel is ~60% taxes? And that permits governments to manipulate consumer demand by controlling the relative retail price of diesel and gasoline. European governments favor diesel because of the lower carbon footprint per mile driven. Which has driven the higher global demand for diesel that is reflected in U.S. prices.

N_Jay

Nom No! It is a big bad conspiracy!

Shadow5501

Ok, if you say so!

I've always one, and sometimes two, MB diesels since about 1990. Two decades ago I definitely noticed the increase in diesel prices in the fall. However, the last few years it seems to be steady year-round. Perhaps the heating fuel demand just isn't significant enough in today's market. Down here in Texas everyone uses natural gas for heating, with maybe a little electric here and there. Dunno.

N_Jay

It was just a little sarcasm.

Every time fuel prices come up, lots of people jump on the "Big, Greedy, Conspiracy, bandwagon.


It is one of pet peeves!

Dog hauler

No kidding. It's so much easier to believe in conspiracies and fairy dust than it is to actually think about an issue and maybe do some research beyond reading E-mails that fly around the Internet. Just ask the tinfoil hat folks who, among other things, believe the moon landing was a hoax.

As for price gouging, what a joke that concept is. If I have a product to sell and my price is too high, don't buy from me. Go to the next store down the street and buy it at a cheaper price if you can. If the guy down the street isn't charging any less or doesn't have the product and you come back and buy from me, then I must have the lowest price in town (also known as "market price"). How did I gouge you? It's Economics 101 at its most basic.

If a product is in short supply (gas after a natural disaster, for example), it's no different. If you think I'm charging too much, then don't buy from me. If I'm the only gas station in town and you need gas, it's still your choice to buy or not. If I'm charging too much ("price gouging"), don't buy from me. If no one buys my gas, I'll lower my price. If people are paying my price, then by definition I'm charging market price and I'm not "price gouging". It really is that Econ 101 thing.

Just out of curiosity: for those of you who so fervently believe that price gouging is a real concept - if you bought a stock at, say $1/share and for some reason it zoomed to $1000/share in one year, would you sell your stock for, say, $1.30/share (for a tidy profit of 30%) or would you "price gouge" and sell it at the market price of $1000 (a 1000% gain)? Just wondering.

Carsy

Competition creates the market correct price.

Sometimes the' lack of' creates unjustified prices. In this case "watch dogs " provide intervention in the public interest.

ImInPA

Don't show off your ignorance by creating a false equivalency between Conspiracy and Rape. This is corporate greed plain and simple. I am not saying it is a conspiracy in any way. It is just Oil company greed. Also, the LAST thing the oil companies would want is to make Diesel more attractive in the US, as this would reduce overall demand significantly. In the Duck Dynasty world we live in, doesn't greed explain it most simply?

N_Jay

Why?


There is always competition between alternatives.
(Doing without IS an alternative)

N_Jay

Don't show off your ignorance by falling back on buzz words like "Corporate Greed".


Corporate Greed only applies if all the corporations conspire.


So, we return to the fallacy of the conspiracy!

sbailey48

Yea, if they are always gouging us, how come their profit margin always remains the, about 2%.