Why Does Diesel Still Cost Less Than Gasoline In Other Countries?

This really bugs me. Maybe not in all countries, but in some, diesel still sells for less than gasoline. This also perplexes me. I just found this on the internet (it is current as of December 19th):

"SANTO DOMINGO. – For the ninth straight week prices on both types of gasoline, diesel, avtur and kerosene will fall slightly from Saturday 20 to Friday 26, but liquefied petroleum gas will remain unchanged.

The Industry and Commerce Ministry (SEIC) said a gallon of premium gasoline will cost RD$117.80, or RD$0.70 less, and regular will cost RD$108.00, or RD$1.00 less.

The gallon of regular diesel will cost RD$101.00, or RD$1.00 less and premium diesel will cost RD$109.00, or RD$1.00 less.

Avtur will cost RD$76.40 per gallon, or RD$3.85 less and kerosene will cost RD$96.10, or RD$3.90 less."

Diesel sells for 93% of what gasoline sells for in the Dominican Republic! At my local hess, D2 was 80% MORE than gasoline this weekend ($2.85 vs. $1.59)! What gives? I guess our exports of diesel are contributing to diesel costing less in other countries, but 50 - 100% more than gas in the USA.

I have noticed that in Europe a similar price ratio exists in many, if not most countries.

Also, notice the price of kerosene in the article. Its priced at even less than D2 (which is priced less than gasoline). At the two stations that cary kerosene where I live, its about $5 a gallon!

I know that in some instances, governments tax fuels differently, but I can not imagine that governments could subsidize the price D2 so much and retain a balanced budget.

If worldwide supplies of D2 are as tight as the experts portray, why is it priced below gasoline in other parts of the world?

Here is the link:

http://www.dominicantoday.com/dr/local/2008/12/19/30490/Gasoline-diesel-prices-down-for-9th-straight-week

--Nate

My parents recently took a trip to NZ. Diesel pricing was below RUG there. I'm sure this is true in many parts of the world still. Here in the US, we are the victims of any number of influences.

FlyTDI Guy said:

Here in the US, we are the victims of any number of influences.

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Well I am awful glad THAT was straightened out

JettaJake said:

Well I am awful glad THAT was straightened out

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Intentionally vague... if I started listing them, well, I don't have all day...

I believe the conventional wisdom is that higher demand in the rest of the world has spurred US refineries to export more diesel. This creates scarcity over here and drives up prices. Also, diesel tends to be taxed more favorably overseas.

PDJetta said:

This really bugs me. Maybe not in all countries, but in some, diesel still sells for less than gasoline. <snip>

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[1] market forces
[2] Taxes

I believe the following affects the spread in the U.S.:

1. taxes.
2. ULSD costs more to refine. Many countries permit higher sulfur content than the U.S. does, so the refining costs for their fuel is less.
3. Winter right now, and many homes in the coldest regions of the U.S. heat with home heating oil (i.e., diesel fuel) so there's higher demand in the U.S. right now. Higher demand = higher cost.

I'm sure there are other factors at play too.

Oh, and winterized diesel fuel costs more. I doubt they have much of a need for winterized diesel fuel in the D.R., so their fuel is probably cheaper to make than ours is right now.

Other countries subsidize diesel as it is critical to manufacturing/export industries. Many other countries use a lot more diesel relative to RUG and actually export their unleaded to the US (depressing our unleaded costs.) According to the Dept of Energy Energy Information Agency refiners in the US actually lost money on unleaded in November.

One other factor is the crack spread - how a barrel of oil is divvied up for various petroleum products. I'm not certain of this, but it could be a factor contributing to the greater spread in the U.S. For example, the U.S. has a much larger aviation system than does a country like the Dominican Republic, so some of the crude we import must be refined into jet-A. That competes with the crude that might have otherwise been refined into diesel fuel or another fuel. So it's really also a supply/demand thing, but just more from a micro level with how the barrel of crude is divided for all the different fuels and plastics and other petro-based items out there.

Now that 10% of unleaded is subsidized ethanol, that is another advantage denied diesel drivers.

notsofast said:

Now that 10% of unleaded is subsidized ethanol, that is another advantage denied diesel drivers.

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Of course my gasser now gets at least 10% worse fuel efficiency with the new blended stuff, so in the long run it negates itself, both in cost and quantity of gasahol I'm burning.

when I got my golf in 01 I ran the figures and based my purchase on diesal being an average of 12cents a litre (45 cents a US gallon cheaper ) cheaper in northern BC and for most all of the time till mid 05 while I was driving for business such was the case and I figure I saved 17k over driving an SUV getting 25mpg .

Now its always 15cents a litre more expensive ... I wouldnt bother with the TDi if I ran the figure today

One of my favorite sites:
http://www.eia.doe.gov/bookshelf/brochures/diesel/index.html

Ulsd

I think it is the oil co. taking it out on us. When the EPA told them they had to make ULSD(<15ppm) for US. The oil co. said that to make it the $ would go up and there would be less availably. The LSD(<500ppm) was less $ to make and they, the oil co. had more of it.
The LSD was less then Reg. gas and now ULSD is more then Hi test. We get it jammed up you know were.
Walt

From notsofast's link:

The phase-in of the U.S. Environmental Protection Agency’s (EPA) sulfur standards for diesel fuels has the potential to continue to influence diesel fuel prices. The logistics of delivery of ULSD to retail service stations can be a challenge. Most ULSD travels through pipelines on the way to bulk terminals for final transfer by tanker truck to retail stations. Other diesel fuels and petroleum products with a higher-sulfur content in the pipeline, storage, and local distribution systems might contaminate ULSD (jet fuel, for example, can have 3,000 ppm of sulfur). If contaminated, it may not be possible to correct a ULSD fuel batch by blending with additional low-sulfur product, and contaminated batches have to be returned to a refinery for reprocessing, a difficult and expensive problem. Even without potential delivery problems, it costs relatively more to produce ULSD fuel.

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Enjoy the clean air. It's only costing you about 80 cents per gallon.

Zambee500 said:

I believe the following affects the spread in the U.S.:

1. taxes.
2. ULSD costs more to refine. Many countries permit higher sulfur content than the U.S. does, so the refining costs for their fuel is less.
3. Winter right now, and many homes in the coldest regions of the U.S. heat with home heating oil (i.e., diesel fuel) so there's higher demand in the U.S. right now. Higher demand = higher cost.

I'm sure there are other factors at play too.

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I'd say you're wrong on #2. Diesel has been selling more than RUG way before the introduction of ULSD.

Here's a thought Saudi Arabia is "contributing" diesel and diesel related fuels to the "war" effort. THe US military uses what the nation of Greece does per month. We are paying for it indirectly throught higher prices. Also, demand is up, supply is down, price is up.

Rickstdi said:

I'd say you're wrong on #2. Diesel has been selling more than RUG way before the introduction of ULSD.

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Well, here's what the DOE says about it in the link on page 1 of this thread that notsofast posted:

Why are diesel fuel prices higher than gasoline prices?

Historically, the average price of diesel fuel has been lower than the average price of gasoline. However, this is not always the case. In some winters where the demand for distillate heating oil is high, the price of diesel fuel has risen above the gasoline price. Since September 2004, the price of diesel fuel has been generally higher than the price of regular gasoline all year round for several reasons. Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe, and the United States, putting more pressure on the tight global refining capacity. In the United States, the transition to ultra-low-sulfur diesel fuel has affected diesel fuel production and distribution costs. Also, the Federal excise tax on diesel fuel is 6 cents higher per gallon (24.4 cents per gallon) than the tax on gasoline.

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and

The phase-in of the U.S. Environmental Protection Agency’s (EPA) sulfur standards for diesel fuels has the potential to continue to influence diesel fuel prices. The logistics of delivery of ULSD to retail service stations can be a challenge. Most ULSD travels through pipelines on the way to bulk terminals for final transfer by tanker truck to retail stations. Other diesel fuels and petroleum products with a higher-sulfur content in the pipeline, storage, and local distribution systems might contaminate ULSD (jet fuel, for example, can have 3,000 ppm of sulfur). If contaminated, it may not be possible to correct a ULSD fuel batch by blending with additional low-sulfur product, and contaminated batches have to be returned to a refinery for reprocessing, a difficult and expensive problem. Even without potential delivery problems, it costs relatively more to produce ULSD fuel.

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PDJetta said:

This really bugs me. Maybe not in all countries, but in some, diesel still sells for less than gasoline. ...

I know that in some instances, governments tax fuels differently, but I can not imagine that governments could subsidize the price D2 so much and retain a balanced budget.

If worldwide supplies of D2 are as tight as the experts portray, why is it priced below gasoline in other parts of the world?

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One, diesel supplies are not that tight right now. Unless this winter turns out to be one of the longest and coldest, there should be plenty of distillate fuels to last until spring.

Two, gasoline supplies are even more abundant.

Three, foreign governments are not really subsidizing the price of diesel with lower taxes, they are just punishing the folks who run gas-engine vehicles.

From the article linked in the top post:
"The Industry and Commerce Ministry (SEIC) said a gallon of premium gasoline will cost RD$117.80, or RD$0.70 less, and regular will cost RD$108.00, or RD$1.00 less.

The gallon of regular diesel will cost RD$101.00, or RD$1.00 less and premium diesel will cost RD$109.00, or RD$1.00 less."

RD108.00 for regular gasoline is about $3.00/gallon, versus about $2.85 for regular diesel. So taxes in the Dominican Republic are much higher than in the US, for both gasoline and diesel.

TAXES is the answer. Both Federal , State and local. It is the easiest and best way the Gov t can hit you in the pocket and try and hide it.