Why are diesel fuel prices rising so fast?
As much as Jim Haughey wants to believe that environmentalists have raised the price of diesel fuel, the facts do not support it. The switch to low-sulfur fuel occurred at the end of 2006 and added about 5 cent to the cost of a gallon of diesel. Refining and distribution costs have not risen recently to account in any way for the price increases. The only thing that has gone up substantially is the cost of crude, from around half the cost of a gallon a year ago to over 62% now. Refining and distribution as a percent of the cost are lower than they were a year ago.
Mr. Haughey might consider the role of foreign speculators in driving up the cost of fuel. Crude oil futures offer a hedge against the falling dollar. Sudden drops in the price of oil in the past were the result of speculators taking their profits. The drop in the demand for crude from a U.S. recession would be a good reason for them to start to bail.
The energy department just reported that diesel fuel pump prices soared to $3.82 /gal. last week . This is $0.16 more than a week earlier and also is more than double the price rise for gasoline. But this spike in diesel prices is not due to cold winter and accompanying extra demand for heating oil as has happened many times in the past. This time the villains are foreign car buyers and domestic environmentalists.