Today in the office, a friend asked me, “Why is diesel so much more expensive than gasoline?” It’s not the first time I’ve been asked that, and it’s not the first time I’ve wondered it myself. Diesel fuel has historically been a relative bargain compared to gasoline, so much so that I used to wonder why more automakers didn’t offer diesel engines in the North American market, as Volkswagen and Mercedes did. A year or two ago I thought that anyone who bought a diesel car was a visionary.

So why is it that today, in 2008, those visionaries are feeling completely ripped off? Why is diesel so much more expensive than gasoline? To find an answer, I did what any good journalist does: I turned to the Google. What I found there was less that satisfactory, to put it mildly, but it was a start. I found a couple online entries that quoted this statement from the Energy Information Administration:

“Until several years ago, the average price of diesel fuel was usually lower than the average price of 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 gasoline all year round for several reasons. Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe, and the U.S., putting more pressure on the tight global refining capacity. In the U.S., the transition to low-sulfur diesel fuel has affected diesel fuel production and distribution costs. Also, the Federal excise tax on diesel fuel is 6 cents higher per gallon (24.4 cents per gallon) than the tax on gasoline.”

At face value, the reasons stated in this quote seem reasonable. Growing global demand and tight production… sure, sure, I get it. But those market conditions are also affecting the price of gasoline, so how is it that the price of diesel fuel has leapfrogged that of gasoline?? If the same forces are affecting both, shouldn’t the two prices be growing at approximately the same rate, and in approximately the same relation to each other? And the argument about the switch to Ultra-Low Sulfur Diesel Fuel doesn’t quite sit right with me, either… After all, ULSD was introduced to the market in mid-2006; why didn’t the price skyrocket two years ago?

Is there an answer to the question? Is it supply and demand, or is there something more sinsiter going on? What do you think?

My little town in southern Wisconsin is almost completely shut off from the outside world this week. As the Rock River continues to rise as a result of two weeks of torrential rainstorms, roads in, around and out of town are being overcome by the rising waters, and we are faced with the prospect of limiting–and perhaps even eliminating–travel for the foreseeable future.

It’s going to take a long time–long after the flood waters have descended–to determine the full extent of the damage, but there is one effect we may see fairly soon. Here in my town, E85 ethanol has been selling for a full dollar a gallon less than regular unleaded gasoline–$2.99 vs. $3.99–but I wonder if that may change. This morning I heard on the radio that the floods are taking a very heavy toll on the corn and soybean crops in the midwestern states. The report stated that as much as 21 percent of the corn crop may already be lost, which, of course, will put upward pressure on the price of E85.

Losses to the soybean crop are harder to estimate, since the problem there is that the traditional June 10 planting day for soybeans now has to be pushed back indefinitely, and no one can say how that delay will ultimately affect the harvest. It is safe to predict, however, that the price of biodiesel will be adversely affected by a smaller than expected soybean harvest.

Of course, Hurricane Katrina taught us that Mother Nature can be a much more menacing foe than OPEC when it comes to affecting energy costs. Now here we are, a few years later, facing a similar threat, only this time two of the best solutions we have to our energy crisis–ethanol and biodiesel–may soon become part of the problem.

After being gone for some vacation time, I’ve returned to my desk to find that my last blog post has stirred up quite a response from our readers. The response has been so strong that I feel the need to address some of the comments that have been made.

First of all, I’d like to say that it is possible to disagree with the the national defense policies of this administration and still support our troops, AND, yes, still be a patriot. The propensity to equate disapproval of the invasion of Iraq with a lack of patiotism or a lack of support for our armed forces is part of the divisive sickness that has infected our country and our public discourse for the past eight years, and I for one will be happy to see that end. In no way did I mean to criticise our troops or denigrate their work. By not using gasoline over Memorial Day weekend, I was showing my sincere support for the work that our soldiers are doing and the risks they are taking in the name of our wonderful country, and I can’t believe that anyone would criticize me for that.

I would also like to say that there is not a single Iraqi that I’m aware of–from Saddam Hussein on down–who has ever directly threatened my freedom of speech or my freedom of the press. You may not agree with me over that, but I think you’d have a hard time proving that I’m wrong. Likewise, you may not agree that not using gas over Memorial Day weekend is a fitting tribute to our troops, but how does reducing our need for oil from the Middle East, even in my small way, hurt the situation?