Just what drives diesel price history? To understand diesel prices’ history, we need to look closer at crude oil prices and at several other factors.
Supply and demand, seasonal changes, and global market trends all have huge impacts on crude oil prices and, by extension, diesel fuel prices. Read on to learn more.
1. Consider Supply and Demand
Analyst Randy Mullett states that diesel price fluctuations typically boil down to a simple supply vs. demand calculation. When we have a lot of readily accessible crude on hand, the oil demand is way down.
This supply and demand relationship can change quickly, though, especially with the changing seasons (which we’ll cover more in a second). The harder it is to ship during the different seasons, the higher the demand for oil and diesel–raising prices.
However, one significant shift in the supply and demand relationship should alter the course of diesel’s history. That change was brought about by a decrease in the jet fuel our society uses as a collective after the Covid-19 pandemic.
Even worse, jet fuel is remarkably similar to diesel, meaning that an excess of jet fuel will translate to a lot of extra diesel for diesel cars in the USA. We’re likely to see prices drop as petroleum companies begin lowering costs to shift their unsold stock.
2. Seasonal Changes Affect Shipping Costs
From seasonal fuel blends to treacherous road conditions, changes in the weather create some of the most drastic shifts that we’ve seen historically in the diesel market. Even the best diesel cars can struggle in winter conditions.
We’ve even seen large storms almost permanently raise or lower oil prices depending on the vehicles and processing plants that they affect.
Diesel is a business, and diesel’s changing price is all about a petroleum company’s bottom line.
Shifting Fuel Blends Shift the Price
Temperature fluctuations are managed behind the scenes by petroleum manufacturers. While they are something you’ll probably never think about, the process is cool all the same.
As the weather heats up, both gas and diesel arrives at fueling stations as a mix that’s much less likely to vaporize. This adjustment helps mileage and lowers the chances of a gas explosion. Understandably, this safety measure is regulated by the U.S. Energy Information Administration.
The opposite changes are undergone in the winter. Petroleum companies winterize their fuel by adding anti-freezing agents to ward off clogged pipes, seized engines, and worse.
So, adjusting fuel mixtures is a reoccurring cost that businesses have to include in their budgets. We stay safer, but the price of our fuel increases.
Storms Wreak Havoc on Diesel Price History
Storms like hurricanes, tornados, ice storms, and more cause flooding and high winds. These environmental forces damage the infrastructure that fuel companies use to transport or produce the fuel they sell.
If you think back to the large natural disasters in U.S. history, then you’re likely to see spikes in the cost of diesel as companies had to raise their bottom line to meet demand.
For example, in 2011, a spring blizzard halted production in the Bakken oil fields after it caused a site-wide blackout. The blackout crippled the oil fields, as most newer pumps are electrically powered.
Even the threat of a tropical storm can increase the price of oil. Oil workers will be asked to evacuate offshore drilling rigs if a storm begins to head their way. This loss in productivity often only results in a tiny spike in price, though.
Cold Weather Makes Deliveries Harder
During the winters, roads become slicker and—sometimes—impassible. This increase in difficulty makes a transport company’s bottom line increase, which increases the cost of diesel to the consumer.
However, there’s a less obvious force at play here. During the winter, refineries begin to shift some of their production to heating oil to help heat homes and offices all across the U.S.
Producing heating oil drives down the total available diesel because there’s not enough petroleum to go around. This shift in supply has historically increased the price of diesel.
3. Don’t Forget About Trade Agreements and Global Competition
Tariffs directly increase and decrease the price of diesel fuel; to start with the obvious. Currently, we export a lot of oil throughout the world—primarily to China. Several years ago, China raised its tariffs. Because the increase was significant, the amount of oil the U.S. could export dramatically shrank.
This backup has given us a surplus of oil that we can’t seem to sell, driving diesel prices down for us Americans and up for other countries.
On top of tariffs, the U.S. oil and gas industries have to compete globally against powerhouses like Russia and Saudi Arabia. As each sector of the petroleum industry fluctuates in power, so does the price of diesel worldwide.
What’s more, Russia is on track to outpace the U.S.’s production in 2021. This market shift could drive our oil prices up or down, depending on how the U.S. wants to compete.
One potential area for oil companies to move into is the liquid natural gas industry. There is currently less competition, and there are fewer obstacles. This means that we may begin to see American companies moving toward producing plastics instead of fuels.
While this is a really cool and possibly historical shift, it might spell doom for the lower diesel prices that we currently enjoy in America today. In this case, reliability is everything, and we recommend that you take your car in for performance diesel services and for regular servicing to keep the mileage up.
However, we’ll see what happens. Historically, the U.S. has also had some of the sweetest fuel on the market. Our consistently low sulfur counts place our product a cut above the products of our global competitors. This advantage may help us to pull back into the lead.
Where Does This Leave Us?
The fluctuating diesel gas price history is a saga in and of itself. Right now, the future of diesel is in flux. As the world moves toward renewables, will owning diesel cars in the USA make sense as prices rise and fall?
As we look back on diesel price history and the things that have affected it, we believe that diesel’s future is still worth exploring.
Lastly, if you have a diesel vehicle and you need more mileage because prices are increasing, the best way to move forward is with regular engine servicing. We’d love to help you out!