Diesel cheaper than gas for first time in six years

Updated Jul 25, 2015
Source: EIA, Gasoline and Diesel Fuel UpdateSource: EIA, Gasoline and Diesel Fuel Update

The average retail price for diesel fuel dropped below the average retail price of gasoline on July 13, the first time that’s happened since August 2009.

According to the U.S. Energy Information Administration’s July Short-Term Energy Outlook, diesel’s retail price per gallon is expected to fall to an average of $2.86 in July 2015, two cents a gallon lower than the previous month. However, it is projected to rise to $3.03 a gallon in 2016.

Higher diesel prices are caused by several factors, including a global demand for diesel, federal fuel taxes that are six cents higher than the tax on gasoline, and the higher production costs of ultra-low-sulfur diesel (ULSD).

Over the past six years the demand for diesel has increased due to the growing needs of developing countries and the switch to ULSD for heating homes in the northeastern United States. The demand for gasoline, on the other hand, has dropped during the same period, thanks to more fuel-efficient cars and changing driving patterns.

The demand for gasoline and diesel have polar seasonal peaks, with gas being used most in the summer and diesel use peaking in the winter.

Consumption of gasoline has grown since the beginning of 2015. In most states the retail price of gas is at its lowest in years. High prices in states such as California have raised the national average gasoline price.

The fall in gas prices is directly related to the plunge in North Sea Brent crude oil prices, which went from $112 a barrel in June 2014 to $48 a barrel in January 2015.

The lower diesel prices are likely to be a short-term phenomenon, as summer begins to wind down and demand for diesel grows with the fall harvest and winter heating season, according to EIA.

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