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The market values Diesel more. Diesel fuel has more energy per gallon, and a diesel engine as run in the real world is more energy efficient (in a lab gasoline

The market values Diesel more. Diesel fuel has more energy per gallon, and a diesel engine as run in the real world is more energy efficient (in a lab gasoline is slightly more energy efficient, but the difference is slight and the conditions needed to make this happen are rare in the real world). Thus those who use a lot of fuel - things like freight and earth moving normally use diesel engines. These are also applications that have less elasticity, so when price goes up they don't use less. (when gas prices go up a few people drive less - or buy more fuel efficient cars, people running diesel already are buying the best fuel efficiency they can for their needs). While diesel is less refined, the difference isn't much. These days both are heavily refined products, and the cost to refine gasoline isn't very much per gallon. The real answer: supply/demand is the key factor in the price you pay. Cost to create/build a product generally sets a floor on the price you pay: a business that isn't making money will stop making the product (loss leaders exist, but not a factor here).

teiferer 5d ago
That sounds like a great theory but is not consistent with the observation that until not too long ago, diesel used to be cheaper. How do you explain that? That's the problem with hindsight theories, especially if only using a limit horizon into the past.
- bluGill 5d ago
  Supply demand. As refineries got better at cracking fuel they made more and more gasoline since that is what the market wanted. However to change the mix they need to make a long term bet on it isn't worth it to build/rebuild their expensive refinery to produce a different mix. A refinery only has a small amount of ability to change what comes out, they can't make more diesel without a major rebuild and that isn't worth it.
- travisb 5d ago
  In North America, it's fracked oil making up for declines in conventional crude oil production. Over the past 20-ish years fracked oil, which is mostly too light to cost effectively refine into diesel but makes nice gasoline, has made up most of the increase in oil production. At the same time, conventional crude oil production has been slowly declining. Conventional crude is quite easy to refine into diesel. Heavy/sour crude replacements are more expensive to refine into diesel because more work is needed; also preexisting refineries need refitting to support it. The net result is that diesel production hasn't kept up with the wider percentage increase in oil-based fuels and refinement is more expensive because it's a choice between cheaper oil which requires more work and costly refits, or less-available and therefore more expensive base oil. Thusly diesel is more expensive due to cost of production and reduced relative supply.
boilerupnc 5d ago
I found this Planet Money Episode [0] really insightful as well to understand the components that drive the price of a gallon of gasoline. [0] https://www.npr.org/2022/08/31/1120422634/breaking-down-the-price-of-gasoline https://www.npr.org/2022/08/31/1120422634/breaking-down-the-...

teiferer 5d ago

That sounds like a great theory but is not consistent with the observation that until not too long ago, diesel used to be cheaper. How do you explain that? That's the problem with hindsight theories, especially if only using a limit horizon into the past.

bluGill 5d ago
Supply demand. As refineries got better at cracking fuel they made more and more gasoline since that is what the market wanted. However to change the mix they need to make a long term bet on it isn't worth it to build/rebuild their expensive refinery to produce a different mix. A refinery only has a small amount of ability to change what comes out, they can't make more diesel without a major rebuild and that isn't worth it.
travisb 5d ago
In North America, it's fracked oil making up for declines in conventional crude oil production. Over the past 20-ish years fracked oil, which is mostly too light to cost effectively refine into diesel but makes nice gasoline, has made up most of the increase in oil production. At the same time, conventional crude oil production has been slowly declining. Conventional crude is quite easy to refine into diesel. Heavy/sour crude replacements are more expensive to refine into diesel because more work is needed; also preexisting refineries need refitting to support it. The net result is that diesel production hasn't kept up with the wider percentage increase in oil-based fuels and refinement is more expensive because it's a choice between cheaper oil which requires more work and costly refits, or less-available and therefore more expensive base oil. Thusly diesel is more expensive due to cost of production and reduced relative supply.

boilerupnc 5d ago

I found this Planet Money Episode [0] really insightful as well to understand the components that drive the price of a gallon of gasoline. [0] https://www.npr.org/2022/08/31/1120422634/breaking-down-the-price-of-gasoline https://www.npr.org/2022/08/31/1120422634/breaking-down-the-...