Diesel-Fuel Costs

As of May 17, the national average cost of a gallon of diesel fuel is $5.57 — which is a record high, according to the American Automobile Association. A year ago, it was $3.17 per gallon. 

We are now reaching the point where the cost of diesel fuel is making some goods too expensive to transport. One trucker told the Orlando Fox affiliate that, “The cost of diesel is single-handedly taking us out of the game one by one no matter how big you are.”

If we really want to know why the cost of diesel is increasing faster than the cost of regular gasoline, we need to look at those refining costs. It doesn’t matter how much we “drill, baby, drill,” unless we also have the ability to “refine, baby, refine,” — or we become dependent upon foreign refiners.

The U.S. started 2021 with its lowest annual refining capacity in six years,
and that capacity did not expand significantly over the rest of the year. And as the pandemic’s effects on American life faded, month by month, demand for fuel increased — not just from drivers but from trucking and shipping companies, construction companies — remember, 98% of all energy use in the construction sector comes from diesel — and from airlines and other consumers of jet fuel.

In short, successive administrations, consumers, and the cultural zeitgeist made it clear to the oil industry that their product did not have a future — and so oil companies reduced their investments at all stages of seeking out, drilling, obtaining, and refining their product.

With diesel so expensive, keep an eye on jet-fuel prices squeezing the airlines and prompting them to cancel insufficiently profitable routes. The EIA reported this week that, “East Coast jet fuel inventories declined to 6.5 million barrels the week ending April 8, 2022, the lowest for any week since 1990, when we began reporting weekly jet fuel inventories by region.”

Source: National Review