The 411 on High Diesel

Published on

The Mr. Roadshow Column: 

Q: Can you explain why the price of diesel has gotten so out of hand and is squeezing truck drivers so much, when for years it was so much cheaper than gas?

David Whitaker
San Jose

A: Oh, lordy. At a record $4.21 a gallon, high diesel prices are sending truck drivers and commuters into a tizzy. Here are some answers:

–The bulk of diesel demand comes from agriculture, truckers and rail lines. That means demand is inelastic — you can’t park the tractor or stop hauling pigs and produce. So refiners who have temporarily had to shrink profit on gasoline are making it up with diesel, says Judy Dugan of a consumer watchdog group. Believe it or not, in February, most dealers were barely breaking even on pump sales and some were losing 8 cents a gallon, according to the state Energy

–Demand is up. More Americans are driving cars that use diesel because of the great mileage they get. And in Europe, about half of all vehicles run on diesel.

–A cold winter in Japan, Europe and the United States boosted demand by 20 percent for heating oil, essentially the same product as diesel.

–New cleaner-burning, low-sulfur diesel is more expensive to produce, adding a few cents to the price at the pump.

Contact Gary Richards at mrroadshow@mercurynews .com or (408) 920-5335.

Consumer Watchdog
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