What are the components of the retail price of diesel fuel?
The cost of producing and delivering diesel fuel to consumers includes the costs of crude oil, refinery processing, marketing and distribution, and retail station operation. The retail pump price reflects the costs and the profits (and sometimes losses) of the refiners, marketers, distributors, and retail station owners. The relative share of these cost components to the retail price of diesel fuel varies over time and varies among regions of the country.
Federal, state, and local government taxes also contribute to the retail price of diesel. The federal tax on-highway diesel is 24.40 cents per gallon, which includes an excise tax of 24.30 cents per gallon and the federal Leaking Underground Storage Tank fee of 0.1 cents per gallon. As of January 2026, state taxes and fees for on-highway diesel averaged 35.86 cents per gallon. Local market conditions; location of the fueling station; sales taxes, along with local and municipal government taxes, can also affect the retail price of diesel. Some retail outlets are owned and operated by refiners, and others are independent businesses that purchase diesel fuel for resale to the public.
Why are diesel fuel prices higher than gasoline prices?
Before 2004, the average price of diesel fuel was often lower than the average price of regular gasoline. In some winters when the demand for distillate heating oil was high, the diesel price rose above the gasoline price. Since September 2004, the price of diesel has been generally higher than the price of regular-grade gasoline throughout the year. This is because the worldwide demand for diesel and other distillate fuel oils steadily increased, with strong demand in China, Europe, and the United States. In the United States, the transition to ultra-low sulfur diesel (ULSD) fuel affected diesel fuel production and distribution costs.