Lately, diesel prices have given us sleepless nights, and filling up the fuel tank for your vehicle has become one of the costliest affairs. However, off-road diesel fuel intended for non-highway usage is still cheaper than its on-road cousin. The difference is only in color; the off-road diesel is red and can fuel your construction equipment, tractor, or generator.
We’ll help you delve into the factors affecting off-road diesel prices.
The most critical factor determining the off-road diesel price is state or federal excise taxes. Since the federal government does not tax off-road diesel (unlike on-road diesel), its price entirely depends on the state excise taxes. For example, in Texas, there are no federal excise taxes on this fuel type. As a result, it’s cheaper there vis-a-vis on-road diesel.
The global demand for distillate fuel is another element influencing diesel prices, be it off-road or on-road diesel. Distillate fuel gets converted to diesel, but it works as heating fuel. If countries in the Northern Hemisphere experience a cold winter, they will require more fuel for heaters, which might lead to a scarcity of a substance needed to create the diesel fuel.
Furthermore, other nations consume even more diesel fuel than the United States, and if their need exceeds their supply, the United States may actually pay for its additional consumption. This consumption demand can lead to an increase in the price of off-road diesel.
The distance between the distributor outlets and the sources of supply often increases transportation expenses. Diesel fuel prices, including off-road diesel prices, are higher in areas farthest from the Gulf Coast, which produces almost half of all diesel fuel in the United States.
Local Competitiveness and Local Operating Expenses
The retail off-road diesel price also includes local market factors such as the distributor location and its ownership. Some retailers are owned and operated by refiners, while others are independent firms that buy off-road diesel from wholesalers.
The cost of conducting business might vary substantially depending on the distributor’s location. These expenditures include salaries, rent, and insurance taxes. Off-road diesel prices can also be affected by competition in that location.
Diesel Fuel Demand and Supply Imbalance
Transportation fuel costs in the United States are often more volatile than other commodities. The vehicles and equipment using off-road diesel are nearly entirely reliant on petroleum. Diesel inventories may fall fast if petroleum supply drops abruptly due to refinery difficulties (during natural disasters such as hurricanes) or lagged imports. Certain wholesalers may increase their bids for available products when stockpiles are low. Prices will stay relatively high if there is no fast movement of supply from one location to another. These regular price swings in the fuel sector include off-road diesel.
Diesel prices sometimes change by 20 cents during a month. This situation is frustrating; however, several local and global factors influence off-road diesel prices. Understanding these reasons for off-road diesel price fluctuations can help businesses and individuals understand the financials involved when budgeting their fuel spending and transportation requirements.