Drilling for diesel

A price anatomy of trucking’s most volatile cost component

Drilling down into the component parts of the diesel price per gallon is a tricky business and involves assumptions that don’t and couldn’t possibly take into account the full complex reality of the fuel production, distribution and marketing businesses.

For instance, the primary governmental authority on the pieces of the diesel price pie, the U.S. Energy Information Administration, regularly provides a breakout of the percentages of diesel’s price that covers four broad areas — crude oil, refining, distribution and marketing, and tax. “It’s a very simple methodology,” says EIA Energy Information Specialist Jonathan Cogan, “measuring pricing at different points along the way.” But it’s an effective categorization, as it gives observers a way to determine the forces behind price increases or declines and to educate the consumers of diesel fuel — that’s you — about the way the market works.

“There are literally hundreds of thousands of individual decisions that go into the price at the pump, and they’re being made every day over and over again,” says Rayola Dougher of the American Petroleum Institute, pointing out the complexity of the world fossil-fuel-based energy markets.

This article uses $2.74 per gallon of diesel, which was the average price for October-December 2009, according to the U.S. Energy’s Information Administration.