Pain at the Pump

Gas prices are once again in the headlines. And it looks like the diesel prices are also on their way up for 2011. Projected retail diesel fuel prices average $3.14 per gallon for this winter, an increase of 35 cents per gallon over last winter, according to the U.S. Energy Information Administration. In 2011, higher crude oil prices combined with higher refiner margins push annual average prices for motor gasoline and diesel fuel to $3.00 and $3.23 per gallon, respectively. 

But Land Line reported that a recent five-week trend has shot the average up to $3.331 per gallon to start the year. California diesel is already over $3.50 per gallon, averaging $3.507 for the week. The Central Atlantic region is in second with an average of $3.470 while the West Coast region averaged $3.443 for the week, according to Land Line’s report.

The retail price of a gallon of diesel fuel reflects the underlying costs and profits (or losses) of producing and delivering the product to customers. The price of diesel at the pump reflects the costs and profits of the entire production and distribution chain, including:

-The cost of crude oil to refineries
-Refining costs and profits
-Distribution and marketing costs and profits and retail station operation
-Taxes

So why does the price fluctuate so often? The U.S. Energy Information Administration gives several reasons, including U.S. diesel fuel supply and demand imbalances, seasonality in the demand for distillate fuels and international diesel fuel demand. It seems that caution is the only constant — expect those diesel numbers to fluctuate higher this year.