Diesel lags gas price drops
Dec 3, 2008 10:06 AM,
By Hembree Brandon
Farm Press Editorial Staff
At the long-closed Sack ’n’ Save grocery in our town, the tall, steel pole billboard at their once busy gas station still advertises unleaded gas for $2.14.9 per gallon.
For most of the past year, when gas hereabouts almost hit $4.00, that sign was a reminder of the “good old days” when one could get a gallon for “only” $2.14.
Now, that’s high, by 40 cents or so, as pump prices fall almost daily and oil continues to nosedive, dropping below $45 per barrel this week, the lowest price in five years. It now costs $17 less to fill the tank of my car than just a month or so ago.
Amazing what a worldwide financial crisis and recession can do to stem the flow of dollars going to OPEC and the multi-national oil companies.
But multiply similar per-tank savings nationwide and it’s a nice savings for families being punished with continuing price increases for everything at the grocery store, for winter heating bills, and a host of other goods and services.
For every 1-cent drop in the price of gasoline, annual savings for U.S. consumers is $1.71 billion, according to the federal Energy Information Administration. The decline over the past few weeks translates into nearly $200 billion less per year being spent on gasoline.
Unfortunately for agriculture, a heavy user of diesel, that price hasn’t fallen in tandem with gasoline. This week, at most local stations it was anywhere from 98 cents to $1.04 per gallon more costly than gasoline. While most farmers buy diesel at bulk prices, and generally are exempt from some of the taxes levied at the pump, their fuel costs have not declined proportionate to gasoline.
Until recent years, diesel was significantly cheaper than gasoline — as one would think always the case, since it requires less refining than gasoline.
But industry watchers say it’s all a matter of demand: while demand for gasoline has dropped precipitously, not so for diesel. Usage in the U.S. continues strong and the increase has tripled that of gasoline over the past five years. Diesel demand has risen sharply in China as its economy has boomed, and in Europe, where diesel autos are far more numerous than here, thanks to $8 per gallon gasoline and government tax incentives for purchasers of diesel cars.
Toss in heavy production of heating oil during the U.S. winter, which tends to keep diesel prices high, and not much relief is in sight for users of the cruder fuel.
The U.S. Energy Department says one 42-gallon barrel of crude oil can be refined into 19 gallons of gasoline and 10 gallons of diesel and heating oil combined.
Critics say that while oil companies have been raking in record profits, they have failed to invest in additional refining capacity to meet increased diesel demand.
And they say the big focus on ethanol is partly to blame — that increased production of ethanol has replaced several billion gallons of gasoline, and because refiners made less gasoline, diesel production was also reduced.
e-mail: hbrandon@farmpress.com
