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Diesel fuel explained Diesel prices and outlook

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.

The retail price at the pump also includes federal, state, and local taxes. The federal excise tax for on-highway diesel fuel is 24.30 cents per gallon, and the federal Leaking Underground Storage Tank fee is 0.1 cents per gallon. As of January 1, 2022, the average of total state taxes and fees for on-highway diesel fuel was 32.66 cents per gallon. Sales taxes, along with taxes applied by local and municipal governments, also contribute to the final selling price of diesel fuel. Local market conditions and factors such as the location of the fueling station can also affect retail diesel fuel prices. Some retail outlets are owned and operated by refiners, while others are independent businesses that purchase diesel fuel for resale to the public.

What we pay for per gallon of on-highway diesel fuel 2012-2021 average retail price $3.15/gallon 2021 average retail price $3.29/gallon refining costs and profits federal and state taxes distribution and marketing crude oil 14.2% 17.4% 19.6% 48.9% 13.5% 17.4% 20.2% 49.0% Data source: U.S. Energy Information Administration, Gasoline and Diesel Fuel Update

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 price of diesel fuel rose above the gasoline price. Since September 2004, the price of diesel fuel has been generally higher than the price of regular-grade gasoline throughout the year for several reasons. Worldwide demand for diesel fuel 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. In addition, the federal excise tax on diesel fuel is 6 cents higher per gallon than the federal excise tax on regular-grade gasoline.

To view recent diesel fuel prices and forecasts for diesel fuel prices, visit the Gasoline and Diesel Fuel Update and the Short-Term Energy Outlook.

Last updated: March 15, 2022