10 years later, here we are, still complaining about gas (petrol) prices, oil production politics, and consumer choice.
What’s changed?
- The Big Three American car manufacturers have largely reduced or halted production of sedans, wagons, and hatchbacks, opting for less-efficient SUVs.
- Focus shifted from gas and diesel to full EV and hybrid models costing much higher.
- EVs are now produced by most manufacturers.
- Strain on power infrastructure already causing rolling blackouts and increased bills.
- Political shift from energy independence to imported oil.
- The pandemic.
- Western embargo of Russian oil as punishment for Ukraine invasion.
What hasn’t:
- Europe and the rest of the world continue to enjoy vastly greater selections of efficient non-electric vehicles—several above 65 MPG (USG) or 80 MPG (IG).
- Costs of oil production remain relatively stable.
- Federal, state, and local gasoline taxes.
Wait! WTI Crude pricing fell from $120 in June 2022 to around $75 by this writing. Gasoline/Petrol pricing likewise declined as a result. Our local pump price was $2.99 this morning. Complaints have largely subsided by all but the truckers. For now, anyway. So, why did it fall? Trader’s fears of a deep recession. Record inflation, slowing economy, reduced demand, etc. You might hear less complaining, yet fuel prices remain relatively high. The vast chasm between diesel and regular unleaded gas also remains. And what about the efficient diesel selections in the USA vs Europe’s? Americans still getting screwed? I wrote about this several years ago. Maybe. Or maybe not.
Let’s back up a tad …
“Why does diesel cost more than regular gas when it didn’t 25 years ago?”
The short answer is production costs. Refinement of diesel used to cost less than gasoline before the advent of Ultra-Low-Sulfur Diesel (ULSD) around 2006. Previously, diesel fuel was lower on the distillation rung and it required less additives. It was also environmentally toxic and destructive, leaving carbon soot, sulfur, and other unburnt chems everywhere. Government mandates for cleaner diesel ensued, and to accomplish it meant more refining and additives. Naturally, increased costs were relayed to the consumer. On top of this, governments decided that since road construction and maintenance costs are largely paid from fuel taxes, vehicles predominantly responsible for road wear should be taxed higher for their fuel—and it’s mostly heavy tractor-trailers. Problem is, efficient diesel cars and light trucks became victims of the government’s indifference, and in many parts of the US, diesel economy savings aren’t so much apparent. The EPA hoped that European ULSD engines would find their way here as a result of the ULSD mandate. They didn’t. Due to reduction in diesel demand and the cost premiums, there’s less impetus for small diesels. Oh well.
- Diesel fuel costs 20-50% higher than regular gasoline.
- Diesel engine options average $5K-12K higher than regular gas.
- Diesel engines are typically 25-30% more efficient than gas.
Bottom line: No savings advantage for diesel light cars and trucks.
For reference, here’s the low-down on current fuel pricing:
Diesel Pricing LINKS:
https://www.scientificamerican.com/article/why-european-diesel-cars/
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMD_EPD2D_PTE_NUS_DPG&f=A
https://www.cnn.com/2022/07/26/business/diesel-p
https://www.eia.gov/tools/faqs/faq.php?id=9&t=9
https://www.globalpetrolprices.com/articles/4/
https://gasprices.aaa.com/?state=CA
https://gasprices.aaa.com/?state=TX
https://gasprices.aaa.com/?state=FL
https://gasprices.aaa.com/?state=NY
Tax per gallon (rounded to the cent):
Fed Taxes = $.18 on gasoline, $.24 on diesel due to wear generated via heavy trucking
https://www.eia.gov/tools/faqs/faq.php?id=10&t=5
State Taxes: https://www.api.org/-/media/Files/Statistics/State-Motor-Fuel-Notes-Summary-january-2022.pdf
(tax per gallon, prices rounded to the cent)
FL: gas = $.62, diesel = $.61
TX: gas = $.38, diesel = $.44
NY: gas = $.67, diesel = $.71
CA: gas = $.87, diesel = $1.24 (highest)
Lowest taxes? Alaska: gas = $.34, diesel = $.39
Now add the local sales and excise taxes that can add another 5-20 cents on average.
So, is anything being done?
US President Biden argued that gas retailers should lower their prices to reduce pain at the pump, assuming, or rather insinuating, fuel retailers are gouging huge profits from the high prices. He cited record profits from the oil companies—the suppliers of the gasoline these retailers sell. There’s a problem with that assumption.
https://fortune.com/2022/08/09/energy-profit-margins-gas-stations-proof-fuel-retailers-high-gas-prices-alex-kinnier/
So what’s the breakdown of the price of gasoline?
“According to the Energy Information Administration (EIA), an arm of the U.S. Department of Energy, the price paid by consumers can be traced to four major components. Below are those components and their approximate percentages in calculating the cost of a gallon of gasoline:”
| Crude Oil | 49% |
| Federal/State/Local Taxes | 26% |
| Refining | 15% |
| Marketing/Distribution/Profits | 10% |
http://myfloridalegal.com/pages.nsf/main/872136BEBD03D0A585256D02005A2880?OpenDocument
But wait a minute, these figures fluctuate depending on the price of oil and labor costs. For instance, a suddenly higher barrel price does not mean the cost of refining it also increased. That refining percentage may be lowered in trade slightly higher retail profits. Taxes are also set by the gallon, so that fluctuates as well. Generally, higher crude pricing translates to higher profits, albeit marginally. Suffice to say most businesses exist to make a profit, else why bother?
Let’s dive a little deeper.
What’s the cost to produce a barrel of oil, then?
Short answer: It depends, but the average for new and existing wells runs roughly $50 as of today.
https://www.statista.com/statistics/748207/breakeven-prices-for-us-oil-producers-by-oilfield/
$100+ oil price means substantial profits for oil producers. You won’t see them complaining, nor will their extremely pleased shareholders.
Thing is, producers don’t set the price, traders do. Oil producers may influence the trading price by manipulating supply—something OPEC does on a routine basis.
Punishment for Trump’s energy independence policy was Russia and OPEC (OPEC+) opening the eastern taps and flooding the market. Barrel price went negative. Yeah, that happened. Russia and OPEC meant to ruin American drillers by making sub-$50 barrel lower than break-even cost of production. Many US drillers filed bankruptcy before the turnaround. That turnaround came with the election of President Biden and his promises to environmentally check local drillers, cancel leases, and cancel the hotly-contested Keystone XL Pipeline by revoking its permit. Traders reacted in kind. By the price chart, oil and gas began their climb exactly the moment of Biden’s *apparent 2020 election win.
(* I’m not going to wholly ignore the fact that an election debate ensued.)
To answer the question if Americans are getting the shaft with diesel selection, I’d say to a degree, yes. It has more to do with energy policy, foreign diplomacy, and steering (pardon the pun) towards so-called clean, green energy. That’s another debate, widely protested. Does it matter? Maybe not. If we are heading in the EV direction, developments to that end take prominence. What’s been simmering over the horizon for over a decade appears much closer to its big debut, and it will likely crush any doubts and anxieties for EV holdouts.
We’re talking about the Solid State Revolution!
Yes, solid-state batteries. Think of the best new battery technology Tesla employs and will employ in the next few years. Double (or triple) its range and reduce charging times to under 15 minutes. Better yet, increase its lifespan to 10-20 years, reduce its weight by half, and remove the fire hazards.
Here’s a PC MAG ARTICLE we like, although projected ranges appear rather conservative by the numerous articles we researched. It doesn’t include engineering developments in lightweight magnetics and use in motors such as Koenigsegg’s little powerhouse, or other weight-reduction areas that will certainly increase range.
It’s all coming. Worth the wait?
