State Sales and Federal Excise Taxes

• As of January 2009, the Energy Information Administration (EIA) reported that federal excise taxes on motor fuels stood at 24.4 cents/gal for diesel and 18.4 cents/gal for unleaded gasoline. State sales taxes on diesel averaged 21.72 cents/gal and 22.62 cents/gal for gasoline; making the combined taxes for diesel nearly 7 cents higher per gallon. In addition, states such as California impose other taxes on diesel fuel, further increasing its price to consumers. The EIA maintains a website at www.eia.doe.gov. The site offers a wealth of additional information on fuel prices, taxes, federal programs, etc.
  
  

New Environmental Regulations

• New EPA regulations mandating the use of ULSD (Ultra-Low Suphur Diesel) fuel resulted in refineries being forced to modify their processes which resulted in higher diesel prices. While refiners were making these modifications, diesel production was temporarily shut down resulting in shortages, which also pushed prices higher.
  
  

Supply and Demand

• Again, according to the EIA, most tractor trailers, delivery vans, buses, trains, ships, boats, farm, construction and military vehicles are powered by diesel engines. As an example, in 2007 diesel fuel accounted for about 18 percent of total refined petroleum products but 82 percent of the total distillate consumed in the United States. In plain language, the demand for diesel is high but the amount of diesel which can be refined from a 44 gallon barrel of crude is less than 1/5 of its contents. Additionally, both the federal government and many states have instituted tax credits encouraging the purchase of certain diesel-powered automobiles which will have a corresponding effect on future diesel demand.
  
  

Seasonal Demand Flucuations

• During exceptionally cold winters when the demand for distillate heating oil is high, the price of diesel fuel has risen higher than that for gasoline. This occurs because as refiners produce more home heating oil, the amount of diesel produced drops by a corresponding amount.
  
  

Weather

• In 2005 when Hurricane Katrina struck the gulf coast, the price of diesel fuel increased almost overnight by about 50 cents per gallon. This was because many of the refineries along the gulf coast were flooded and shut down.
  
  

Geographic/Regional Diesel Price Disparities

• Diesel fuel is typically transported from refineries via pipeline. If the destination is close to the refinery, the final retail price of the diesel fuel reflects this. As an example, the price of diesel in Texas, a state with both many refineries and miles of pipelines is considerably less than in the northeast where the distances from the refineries is greater, and not much of the region is supplied by pipelines.