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What affects diesel fuel prices?

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Quick Answer

The price of diesel fuel is affected by a number of factors, including the initial cost of crude oil, the cost of refining and the taxes levied by government. There is also a range of logistical costs associated with the distribution and marketing of diesel fuel that inevitably filter down to the consumer.

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What affects diesel fuel prices?
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Full Answer

The cost of crude oil is in itself subject to the influences of supply and demand, not only in the United States but around the world. Supply is controlled by the Organization of the Petroleum Exporting Countries, which has the power to cap crude oil production. Demand for diesel fuel, which is primarily used in transportation, rises and falls with economic trends.

Diesel fuel prices will vary from region to region based on taxation. While federal taxes are unilaterally applied, states levy their own additional taxes, as do some county and even city governments.

Another factor known to affect the price of diesel fuel is weather. During colder months, when the demand for heating oil is high, the supply of diesel oil can become scarce. This is because heating oil and diesel oil are produced at the same stage of crude oil refinement, which means that an increase in demand for one can lead to a decrease in supply of the other.

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