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Gas prices USA: why is diesel more expensive than gasoline?

The cost of motor fuel is on the rise again in the United States with both gas and diesel experiencing record highs according to AAA.

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Fuel prices in the United States have reached record highs for the second time in recent months, according to figures released by AAA on Tuesday.

They found that the average price of a gallon of gasoline has risen to $4.374, while a gallon of diesel now costs $5.550 on average across the United States.

The cost of diesel in particular has undergone an astonishing increase in the past 12 months, and was at just $3.115 at the same point last year. This equates to a year-on-year increase of a staggering 78%.

Why does diesel cost more than gasoline in the US?

As both motor fuels are made from crude oil, some may expect the price of diesel and gasoline to be fairly closely linked. However there are a number of factors, from taxation to manufacturing costs, which actually make diesel more expensive to buy.

The major reason for the cost disparity is the high federal and state taxes levied on diesel, largely due to the carbon emissions produced. The federal tax on diesel is currently 24.4 cents per gallon, as opposed to 18.4 cents for a gallon of gasoline.

The rate of tax levied by states varies massively, but some add as much as 74.1 cents per gallon of diesel.

It is also important to remember that the demand for diesel is often very different to that of gasoline, meaning that they are affected by different factors. Diesel is typically used in industrial processes, machinery, generators and large delivery lorries. Therefore when the economy is growing the demand for diesel, and therefore the cost, increases. Gasoline is not subject to these pressures in the same way.

Has diesel always been more expensive than gasoline?

In a word, no. Initially thought of as a more economical alternative because of the better miles-per-gallon it produces, diesel was favoured by motorists looking to save money. The price of a gallon of diesel was cheaper than gasoline too.

Data produced by the US Energy Information Administration shows that diesel was cheaper that gasoline as recently as 2004. After that point, gasoline has consistently been the cheaper of the two.

However the tax increases have come from states, because the federal government has not adjusted the rate of federal tax on either gasoline or diesel since 1993.


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