Is There A Way To Try To Keep Diesel Price Rises Down?

Posted by on April 20, 2012 | No Comments

Diesel fuel belongs to the most significant commodities which affects world economies. Transport is a central ingredient of virtually all industries, and transport is reliant on diesel. The result is that if the price of diesel climbs up, transport companies increase their prices and the delivered price of products rises in turn. We’re not able to check out ways of retarding the rates of increase without understanding the root causes.

Finding out the price of a gallon of gasoline is dependent upon several basic factors. The price tag on crude oil is the single greatest determinant, accounting for about 60% of the overall cost. Soon after acquiring the crude oil from the nations that produce it, it is brought to the refineries, where they extract the low-sulfur diesel and other petroleum products. A barrel of crude is processed to make approximately 10% of a barrel of diesel, and this accounts for about 20% of the price of diesel.

The end price of diesel is arrived at by adding the marketing costs, distribution costs and taxes levied by government. A further excise tax of 10% is added to the price of fuel processed within our borders. Even though it won’t attract the excise tax, foreign fuel does pull in import tax, which makes it more expensive than fuel refined locally. Marketing and dispersal may only account for 5% of the price, but these two inputs are what diesel’s value is most sensitive to. The law of supply and demand applies to all commodities, so the price will go up when supply is low and/or demand is high. The price will alter little if supply remains sufficient, and could even reduce if demand falls.

A producer nation’s stability may impact the price importer countries must pay for their oil. Embargoes and wars typically mean an increase in the price asked for crude oil, which in turn means an increase in the price of diesel. The purchaser who bids the highest will have its needs satisfied, irrespective which of many possible factors caused a country to increase its prices. Over certain times of the year the price at the pumps rises, which is probably because of greater than usual travel volumes. This means higher demand, which means higher prices.

When a supplier country is at war supply might be restricted, or it might want to prove a point by forcing a shortage, which then brings about an increase in the price. This can come about with competing oil companies, in the manner they do business, and the consumer is left to pay the bill. Being a consumer you have a single real option, which is to look for ways to use less fuel.

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