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(Darren McGee/The Globe and Mail)
(Darren McGee/The Globe and Mail)

The Green Highway

The great diesel price 'conspiracy' Add to ...

‘Can someone tell why I have to pay 12 to 15 cents more for diesel than for regular gasoline. When I bought my 2009 Jetta wagon, I was paying 3 or 4 cents less, a situation that changed about six months ago. It is my understanding that diesel is cheaper for refiners to make. Is this a conspiracy by Big Oil to dissuade people from buying fuel efficient diesel engines?” a reader from Kingston, Ont., asks in a recent e-mail.

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I love a good conspiracy, especially about Big Oil, but I can’t find one here.

First of all, I also drive a diesel Volkswagen and I filled up recently at my regular discount gas station – I paid $121.9/litre for diesel while regular gas was selling for $122.9/litre. I have seen recent price spreads between gas and diesel, but I can rarely remember seeing a 12-to-15-cent difference. Our friend in Kingston needs to shop around for a better price.

But I have sympathy for his situation because when I bought my diesel the price of its fuel was always well below the price of gas. That was in 2000 and since then demand for diesel has increased steadily.

Take a look at all the transport trucks on the road with their 240-gallon tanks and add in the growing number of diesel-powered cars and SUVs. In Europe, the majority of new cars are diesels. Then add the growth in diesel in places like China and India and you see how stronger demand pushes higher prices. North American refineries are shipping diesel fuel to Europe because of the higher prices they can get.

Back a few years ago, the price of diesel went up in the winter and down in the summer. You only get so much fuel from a barrel of oil no matter what you turn it into. An oil refinery starts with raw crude and cracks it into various kinds of fuels and chemicals. Diesel and heating oil are about the same and demand for heating in cold winters pushed the price of diesel up. Now there’s strong diesel demand year round.

Our reader believes that “diesel is cheaper for refiners to make.” That may have been the case in the past but no longer. Refining costs for diesel are now more expensive than gas or heating oil because of the additional processing it goes through to remove high amounts of sulphur.

Back when I stated driving a diesel the quality of the fuel was pretty bad. In 2006, new diesel fuel sulphur content regulations went into effect requiring that the sulphur content of diesel be reduced from 500 parts per million to no more than 15 parts per million for 80 per cent of all diesel sold for road use. In December, 2010, that standard was made to apply to 100 per cent of on-highway diesel fuel. New sulphur standards for off-highway diesel fuel (construction machinery, generators, etc.) have now also been phased in.

Where you do see diesel priced consistently above gasoline is in the United States. Yes, it’s still cheaper to fill up in the United States but diesel is taxed 6 cents a gallon more than gasoline south of the border.

That may be damping diesel engine demand in the United States but not much as diesel car sales rose 27 per cent last year in the U.S. while hybrid sales slipped. And there are a lot more diesels coming, including a diesel-powered version of the Chevy Cruze.

I’d be happy to expose the “conspiracy” if I could find one. In the meantime, I suggest that our reader shop around for a better diesel fuel price and enjoy the up-to-30-per-cent fuel economy improvement over burning gas.

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