Diesel Fuel Prices: What Truckers Should Know!
Invented in Germany in the 1890s by Dr. Rudolph Diesel, diesel engines are known for their outstanding pulling power, longevity and fuel economy, hence their popularity in trucks, buses and boats.
How is diesel made?
Diesel fuel is created mainly from crude oil that is pumped out of the ground and stored into barrels. In order to create diesel it must be boiled in order to separate the different compounds that make up the crude oil. The heaviest compound that is separated in this heating process is used to make diesel fuel. One whole barrel of crude oil only makes up to 7 or 8 gallons of diesel.
What are the main components of the retail price?
The cost to produce and deliver diesel fuel to consumers includes the costs of crude oil, refinery processing, marketing and distribution, and retail station operation. The retail pump price reflects these costs and the profits of the refiners, marketers, distributors, and retail station owners. The relative share of these cost components to the retail price varies over time and among regions of the country. The price on the pump also includes Federal, State, and local taxes although some states, county and city governments levy additional taxes.
What affects the price?
The local retail price mainly reflects the local market conditions and factors such as the location and the marketing strategy of the owner. Some retail outlets are owned and operated by refiners, while others are independent businesses that purchase diesel fuel for resale to the public. The main factors that affect diesel prices are:
- Cost and supply of crude oil- prices are determined by supply and demand
- Tight refining capacity and international diesel fuel demand
- Product supply/demand imbalances- The transportation fleet is heavily dependent on petroleum and few alternative fuels are available, which makes prices of transportation fuels more volatile
- Seasonality in the demand for diesel fuel and distillates
- Transportation costs
- Regional operating costs and local competition
- Competition in the marketplace
What you need to know about your truck stop:
When crude prices rise, fuel stations raise their prices accordingly -- they have no choice, otherwise they would be losing money on each sale. They all pay the same prices for fuel, and make a relatively small mark-up on the fuel they sell. When the price decreases, however, what forces fuel prices back down is competition in the marketplace. One station lowers prices a few cents, and pulls in more traffic; that forces others to do the same until prices gradually work their way back down to the earlier prices.
You may also be surprised to learn that fuel stations make the bulk of their profits on the convenience store, or on repairs and not on fuel. They prefer to keep fuel prices low as an incentive to draw you in as a customer, where they can make their profits on, well everything else beyond fuel.
Click HERE for state diesel prices updated daily.
How to save at the pump?
With fuel prices so high, the media is awash with lists of fuel-saving tips. Next month we will discuss and share our tips to save more money at the pump. Many of these tips are from truckers themselves.