Have you ever caught yourself wondering why diesel fuel is priced the way it is? Or what goes into determining the price of fuel? As a truck driver, it’s important to understand the key elements outlined below so you can best optimize your trucking route while simultaneously saving money.
Crude Oil
Just like gasoline, diesel starts its journey within the earth’s surface, as crude oil. Factors such as economic shifts, global demand, and political tensions affect the price of crude oil. So when crude oil prices rise, you can bet your bottom dollar that it will impact fuel prices.
Refining
Crude oil never magically turns into diesel. Diesel fuel goes through a rigorous refining process. Heating the oil, then sending the oil to a distillery tower where it’s then separated by boiling point. During the same refining process, the oil goes through additional steps to remove excess sulfur that is found. More steps in the refining process means more money spent by refiners, which in turn affects your wallet.
Fuel stations have regulations they’re required to abide by in regards to the quality of fuel. The higher the quality, the higher the price.
Taxes
We could go on and on and on about the impact taxes have on everything. The excise taxes, carbon taxes, and environmental rules implemented by the Government increase the cost of making and moving diesel fuel.
The U.S Energy Information Administration (EIA) discusses taxes on diesel fuel.
Distribution and Marketing
The journey of every gallon of diesel fuel, from the refinery to the distribution center and then to the fuel station involves specialty transportation methods such as pipes, trucks, trains, and ships. Storing diesel plus the maintenance on the infrastructure, comes with its own set of costs. Fuel stations must follow a strict set of rules on how diesel fuel is stored.
Fuel stations use ads, deals, and many different loyalty programs to get people to buy their diesel. This is part of creating a life-long relationship with customers. FuelStream partners with merchants with some of the best rewards programs on the market. Check out a few of them below:
Supply and Demand
Diesel’s popularity can be a bit of a rollercoaster too, influenced by many different factors. When industries boom and farm operations require more fuel due to seasonal harvests, the demand for diesel skyrockets. We also can’t forget about the seasonal shifts with winter heating and summer travel.
Fuel stations may change their pricing based on what others are charging and the shifts of supply and demand.
Breakdown of Fuel Pricing
Now that you know what factors impact the price of diesel, let’s explore the level of impact for each of those.
Let’s break it down.
On-Highway Diesel
As of February 2024, the retail price for diesel was $4.04/gallon
- 45% comes from Crude Oil
- 22% comes from Refining
- 19% comes from Distribution and Marketing
- 15% comes from Taxes
As you can see, the bulk of the cost of diesel comes from the crude used to make the fuel. Secondarily, the refining process is a significant portion of cost due to the fact that diesel fuel goes through a more intense refining stage that cares more about how thick it is and the cetane rating.
Related: Gasoline and Diesel Fuel Update
Understanding key elements that contribute to a large factor of the trucking world — diesel fuel pricing, empowers truck drivers to make informed decisions about route optimization and fuel efficiency. Combining that knowledge with the FuelStream fuel card, a truck driver has full control of saving hard earned dollars at the pump.
