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Why Is Diesel Fuel More Expensive Than Gasoline?

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We often get asked why diesel fuel costs more than gasoline, especially now that passenger vehicles with diesel engines are finally making it to the U.S. The answer has nothing to do with how the fuel is produced, but rather with government decisions and economic conditions.

Europe used to export diesel fuel to the U.S., but for years forward-thinking European governments have been promoting diesel — a more efficient fuel than gas — with lower taxes and other incentives. The result has been a spike in the number of diesel vehicles there; in Great Britain and Italy, more than 50 percent of all cars run on diesel.

Related: Do You Have to Care for a Diesel Car Differently Than a Gasoline Car?

Therefore, say bye-bye to diesel fuel exports to the U.S. Without the added capacity of European refineries, U.S. diesel prices became more expensive this summer when everyone realized the supply of diesel had become much more limited than it was even a few years ago.

The U.S. also taxes diesel 6 cents more per gallon (24 cents compared to 18 cents for gasoline). The original thinking was that diesel-powered vehicles like large trucks would tear up roads and require more spending on infrastructure. Now, with clean-diesel, or ultra-low sulfur diesel, passenger vehicles on the road, this policy doesn’t make much sense in terms of lowering carbon dioxide emissions and promoting efficiency.

Finally, diesel fuel is the lifeblood for big freight-haulers: Barges, trucks, trains — most all heavy vehicles run on diesel or some heavy petroleum distillate. When the economy is firing on all cylinders, they all move more stuff, and that movement increases the demand for diesel fuel. Now that we’re in the current economic downturn, diesel prices have fallen accordingly as activity has slowed. Diesel, even more so than gasoline, is bound tightly to the speed of the economy.

With all this in mind, why even consider a diesel car? There are many factors, but one of the bigger ones is better fuel economy. Diesel-powered cars get 25-30 percent better mileage than their gas counterparts.

Right now, the U.S. doesn’t have much refining capacity for diesel — something to keep in mind when the economy recovers and you’re thinking about buying that Volkswagen Jetta TDI or Mercedes-Benz Bluetec.

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