Why diesel prices used to be cheaper than gasoline—and what changed here

Diesel’s Long Price Shift

The national average for diesel is $6.06 per gallon, while gasoline averages $3.87, AAA reports. Diesel has not always been more expensive: before 2004, it was usually cheaper than gas, except during winter, when heating demand increased.

The U.S. Energy Information Administration says on-highway diesel has cost more than regular-grade gasoline on a per-gallon basis almost continuously since September 2004. Higher demand and the costs of producing low-sulfur diesel have contributed to the change.

Why Demand Holds Steady

Diesel is used widely in shipping, logistics, farming and construction, even though fewer than 3% of U.S. passenger cars run on it. That broad economic dependence makes diesel demand less responsive to price increases than gasoline demand.

Global Pressures Add Costs

Diesel averaged $3.76 a gallon at the same point last year, compared with $3.08 for gasoline, according to AAA figures cited in the report. The article says diesel rose more than 60% over that period, even as U.S. refineries operated at 97% utilization and the country had a diesel surplus.

Why Exports Are Difficult to Cut

The United States exports about 1.5 million barrels of diesel per day, consumes around 3.6 million barrels and refines roughly 5.3 million barrels daily, according to the American Action Forum. An export ban might lower wholesale prices at first in the Gulf Coast, where much of the country’s diesel is produced, but infrastructure limits could prevent savings from reaching other regions.

New England can import diesel from Canada more cheaply than it can obtain domestic supplies, while the West Coast, Hawaii and Alaska also use imports. The American Action Forum says a lasting ban could leave refiners unable to sell excess fuel, leading them to reduce production and potentially push up prices for petroleum products, including diesel.