For as long as anyone can remember, until recently that is, diesel fuel was always less expensive than gasoline which made things easy for fleet fuel managers.
Why then have diesel fuel prices risen to the point of being higher than gasoline causing your fuel management upside down?
There are many factors that have contributed to this significant price rise. Certainly the evolution of efficient, small and medium-duty diesel engines has increased demand for diesel. The acceptability of diesel powered automobiles and light- and medium-duty trucks worldwide, with the exception of the U.S., has increased demand for diesel fuel. The tide has changed from a gasoline powered world economy to a world economy powered by diesel fuel. Diesel powered cars in the U.S. have not been accepted as they have in other parts of the world, in particular Europe, even though these engines are more efficient that their gasoline-powered cousins. This rejection in this country can be attributed to the fact that Detroit has never pursued the development of diesel power and have concentrated more on the development of hybrids and electric powered cars. This may be due in part to the debacle of the Cadillac diesel in the '80s that was a converted gasoline engine that was plagued with problems. Couple these factors with the higher price of diesel relative to gasoline, and the public perceives that diesel power for everyday commuting is a no-win proposition.
Let us now take a look at another factor that contributes to the supply issue. We all hear about crude oil being sold in barrels. What exactly is a barrel of crude and what can be produced from that barrel? A barrel of oil is 42 gallons of crude. As this 42 gallon barrel is refined into usable product, 19.5 gallons of gasoline is refined as opposed to only about 9 gallons of distillate which includes both diesel fuel and heating oil. The balance of volume includes jet fuel, kerosene, asphalt, lubricants among other products. Now we can really see how all these factors influence the rise in the cost of diesel fuel.
All things considered the diesel fuel price rise could have been worse. However, between 2002 and 2007, the U.S. refining industry tried to keep pace with the shift in product demand by increasing the net production of distillate fuels by domestic refiners by 15 percent and at the same time increased production of diesel fuel by more than 33 percent. This surely helped contain the price of diesel fuel somewhat.
So what does the future hold for diesel fuel prices? It is doubtful that we will ever see diesel prices fall behind those of gasoline considering all of the influencing factors stated above. World demand will only continue to increase and they can only squeeze so much diesel fuel from a barrel of crude. Government mandates for increased use of bio blends will also contribute to continued high and higher diesel fuel prices in the foreseeable future.
Glen Sokolis is president of Sokolis Group, a nationwide fuel management and fuel consulting company, www.FuelManagementSokolisGroup.com. You can reach him at firstname.lastname@example.org or (267) 482-6160.
Previous installments of "Friday Fuel:"
* "Successful Fuel Management Program Equals Discipline", 9-11-09
* "Who's Watching Your Fuel Program," 9-18-09
* "Fleet Fuel Margins: Are You Paying Too Much?" 9-25-09
* "How Do You Audit Your Fleet Fuel Invoices?" 10-2-09
* "Fleet Fuel Price Negotiating: Details, Details", 10-9-09
* "Mobile On-Site Fueling", 10-16-09
* "The Bees Are Still Buzzing: Handling Fuel on a Daily Basis", 10-23-09
* "Fleet Fuel Card Shopping", 10-30-09
* "Is Your Fuel Management Ready for Winter?", 11-6-09
* "Don't Let the Weather Freeze Your Deliveries", 11-13-09
* "Fuel Management or Fuel Inventory? That is the Question", 11-20-09
* "Put Your Fleet Fueling Policy in Place For 2010, Part I", 12-4-09
* "Put Your Fleet Fueling Policy in Place For 2010, Part II", 12-11-09
* "Be Safe, Not Sorry With Fuel Management During the Holidays", 12-18-09
* "Looking Back: 2009 Fuel Management in Review", 12-23-2009
* "Oil's Ups and Downs", 1-8-2010
* "Why Oil Does What It Does When It Comes to Prices", 1-15-2010
* "Controlling Fuel Efficiency When Fuel Prices Are Unpredictable", 1-22-2010
* "The Motivation Behind Mobile Fleet Fueling", 1-29-2010
* "Fleet Fuel Prices: What are They Now?", 2-5-2010
* "Fuel Management Lost at Sea," 3-5-10
* "Spring is in the Air.....and There's Water in my Tank!", 3-19-10
* "Is Bio Fuel Dead for Your Fleet Fuel Program?", 4-2-10
* "Can Fleet Fuel Fraud Happen to You?", 4-16-10
* "Fuel Prices are Pumping Up!", 4-30-10
* "Et Tu Greece? Makes For Crazy Ride on the Fleet Fuel Express", 5-14-10
* "Take the Wild Card Out of Fuel Management", 5-28-10
* "Life Is Like Fuel Management: You Never Know What You're Going to Get", 6-11-10
* "Fuel Management When You Least Expect It", 7-2-10