Diesel prices...

Diesel prices are all set to escalate in the near future. This in turn will increase the overall fuel costs borne by consumers. Fuel consumption data indicates that diesel prices have been steady, while gasoline prices have dropped by 20%, per gallon. A recent report published by the Energy Information Administration indicates that the average national diesel price was .027 per gallon on August 28, whereas the average national gasoline price was .845 per gallon. The Energy Information Administration is a part of the Energy department and acts as its analytical arm.

The main reason for the escalating diesel prices is the recent government order to decrease the amount of sulfur content, to make diesel more environment-friendly. The order dictates that the amount of sulfur in diesel should not be more than fifteen parts, per million. Earlier, the diesel produced in refineries used to have around 500 parts, per million. Due to the order, refineries now have to spend additional funds to meet the specifications. This in turn affects the diesel prices. There are only two possibilities, either the prices will substantially rise or they will remain more or less the same.

In the next six to nine months, the escalating diesel prices will affect the gas prices, since diesel is used in most transportation vehicles, such as tankers, used for transporting gasoline from the refineries to gas stations. The increased transportation cost will add to the overall cost of production and sale. Apart from affecting gas prices, the escalating diesel prices will also affect highway traveling and transportation costs. This again will lead to inflation. Although there are chances of the diesel price index showing an upward trend in the near future, consumers should be aware that such assumptions or predictions are based on certain set parameters. They do not account for the effect of external variables. One such variable that can have a direct impact on the national fuel price is the international crude oil prices. These prices depend on the international demand and supply market. It is very difficult to predict the future trends of the international crude oil prices and hence, when making predictions about diesel prices, it is assumed that crude oil prices will remain the same. However, in reality, the international crude oil prices fluctuate daily. This means that diesel price predictions may or may not be accurate, depending on the current international crude oil prices.

In case diesel prices do escalate, it can lead to an increase in the average fuel costs borne by consumers. Diesel is the main fuel that drives the economy and a rise in the fuel price affects the price of each and every commodity that requires transportation. Transportation is essential in delivering the goods and commodities from the place of manufacture to the market. Escalating national diesel prices can have a negative effect on the economy. The government could implement the order in phases. This will give the refineries enough time to invest in the additional infrastructure required according to the specifications of the government order.