Diesel is actually less refined than gasoline, so why does it usually cost more? The answer has less to do with refining and more to do with demand, regulations, and keeping America's trucks and equipment running.
Diesel fuel is generally less refined than gasoline, yet it usually costs more at the pump. That seems backward until you understand how diesel is produced and used.
Diesel comes from the heavier portions of a barrel of crude oil and traditionally required less refining than gasoline. Today, nearly all highway diesel sold in North America is Ultra-Low Sulfur Diesel (ULSD). Removing almost all of the sulfur requires additional refining and stricter quality controls, increasing production costs.
Demand is another major factor. While gasoline is used primarily by passenger vehicles, diesel powers semi-trucks, farm machinery, construction equipment, freight trains, generators, marine vessels, and many pickup trucks. Strong commercial demand often keeps diesel prices higher.
Seasonality also plays a role. Diesel and home heating oil are very similar fuels, so during colder months refineries often shift production toward heating oil, reducing diesel supply and increasing prices.
Refineries also can't simply produce unlimited diesel. Every barrel of crude oil naturally yields a fixed mix of gasoline, diesel, jet fuel, lubricants, asphalt, and other petroleum products, making major production changes difficult and expensive.
The two most common grades are #2 Diesel, which provides the best fuel economy for everyday use, and #1 Diesel, which resists gelling in cold weather and is commonly blended into winter fuel. You'll also find red-dyed diesel, a tax-exempt fuel intended only for off-road equipment such as tractors, construction machinery, irrigation pumps, and generators. Modern diesel engines also require Diesel Exhaust Fluid (DEF). DEF is injected into the exhaust system, not the fuel tank, where it helps convert harmful nitrogen oxide emissions into harmless nitrogen and water vapor.
Although diesel often costs more per gallon, diesel engines usually travel farther on each gallon thanks to their greater fuel efficiency and abundant low-speed torque, helping offset the higher fuel price.
Want to learn more about modern diesel technology? Watch our companion Hidden in Plain Sight episode, "What Is DEF (Diesel Exhaust Fluid) and Why Do Diesel Engines Need It?" You'll learn what DEF is, how it works, why it's never mixed with diesel fuel, and what happens if your vehicle runs out.
If you enjoy discovering the fascinating stories behind everyday things hiding in plain sight, check out our Hidden in Plain Sight Playlist: https://bit.ly/DFJayHiddenInPlainSight-Playlist
And be sure to subscribe to DirtFarmerJay for more practical explanations, DIY projects, gardening tips, tool reviews, and interesting facts.
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Video Summary
AI Generated
This video explains the various factors contributing to the high cost of diesel fuel, ranging from seasonal demand and industrial reliance to refining requirements and the physical limitations of crude oil yields.
Have you noticed that diesel is really expensive?
No, it's not your imagination. Well, there's some reason behind it
and one of them is going to be really surprising.
Hey, stay tuned and I'll tell you all about it.
Hey, I'm Dirt Farmer Jay from DirtFarmerJay.com.
If you've pulled into a fuel station recently and noticed the prices of diesel and you thought,
wow, that has really gone up, it's not your imagination.
Well, there's some reasons for it and one of them is really surprising.
But let's jump into it. There's reasons such as seasonality.
Now, what happens there? That is certain times of the year
when there's high competition for that fuel and that is winter.
And the reason for that, diesel fuel and heating oil are pretty similar
and come out of the same feedstock out of the petroleum
and therefore they compete. The consumer market is competing against
available feedstock diesel that could be used to power other devices.
So that's reason one. Reason number two, think of it this way.
Gasoline is kind of a consumer level fuel. Sure, industry uses it,
but gasoline typically runs most all of our small engines and our automobiles,
except for some of the diesel engines and electrics that are out there.
But what does diesel run largely? Industry.
I don't care if it's a cargo ship, a locomotive, a semi on the road,
generators, mining equipment, all of that is industrial heavy consumption
and therefore it's a market competition thing. So diesel has a lot more demands on it.
Reason number three, while it used to be true that refinement costs for diesel
were significantly less than it was for gasoline,
that is it took a lot more refining to get the grades of gas that we're used to.
Well diesel now, everything that's on the road in the United States has to be
ULSD, Ultra Low Sulfur Diesel. And for that to happen is more refinement costs
which shows up in the price of the diesel. So there's reason three.
And perhaps the most surprising of all is that you can't just create more diesel
out of any given unit of petroleum. The common unit, at least at the commodity trading level,
is the barrel, which is 42 gallons. And out of that you can't just say,
well let's just make more diesel and not make other stuff like asphalt or gasoline.
You can only get so much out of each one. Take a look at this and you'll see what I mean.
So if you look at our pie chart, you're going to see some of the common items that come
out of a barrel of crude oil and what percentages. You can see in the upper right about 25.5% is
diesel fuel, but also notice that's heating oil and that alludes to what we talked about earlier
of certain seasonality. Then you look at different areas that about 19% is gasoline.
And then when you look at other things like heavy fuel oil, jet fuel,
and then start looking at lubricants. And out of this also comes asphalt,
bitumen, the things that make roofing products, roofing membranes, all of that are all competing.
Now to be able to change this up, it's not easy to do so. You can't just chemically make the
volume of oil change what it's able to yield without a lot of expense. So there's only so
much you're going to get from each one, creating further price pressure on something that is under
a great deal of demand from the marketplace and from industry. And now you know.
Another interesting thing about the modern diesel engine is that it requires the use of DEF,
diesel exhaust fluid. Check out this episode where we tell you what that is, where it comes from,
and what it does. It's added to a separate tank, not to the fuel, but it's required now. Check it
out. I know you'll learn a lot like I did when I researched it. Until the next time,
this is Dirt Farmer Jay from DirtFarmerJay.com.
