Gasoline Fluctuates, but Diesel Remains Expensive
If you have been watching gasoline and diesel fuel prices like we have, you might have noticed a trend regarding the two liquid fuels. Gasoline has its prices vary over time drastically, but diesel continues to command high prices. Why is this? There are numerous reasons that add up, here are two factors you may not have considered.
Consumer Price Sensitivity
Gasoline enjoys a much larger customer base than diesel fuel, but that customer base leverages harder when it comes to negotiating price. When gasoline prices hit record highs, consumers planned their driving more carefully, carpooling and fulfilling multiple errands at once as necessary.
Commercial vehicles do not have the luxury of simply choosing to drive less, and as such must take on the cost of diesel. It is not all doom and gloom, though, as diesel prices correlate to freight rates, giving fleets some relief whenever the going gets tough.
The Future of Futures
Oil speculators rarely trade physical oil, and instead trade promises that both parties agree are valued based on the price of diesel at the time. Because both parties agree it is worth the same as diesel fuel, the contracts can influence the rate of oil just as much as the other way around.
The way things are now, speculators are generally of the opinion that diesel will cost more money in the future than it does now, and are trading futures accordingly, which helps to fulfill the prophecy, to an extent.
The reasons for thinking diesel may cost more in the future are numerous; one such example is the ongoing talks of rail strikes wherein trucks will be needed to absorb capacity normally reserved for trains.
Conclusion
In the end, the simple answer is basic economics of supply and demand. People are worried about diesel supply while still demanding more of the liquid gold that fuels America’s economy, and the price rises to accommodate both events.
Could the advent of alternative fuels such as electric vehicles bring down the demand enough to have a direct impact on price? That depends entirely on just how popular these commercial vehicles prove to be in the industry.
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