Insights from the What Drives Diesel Fuel Prices?

Our model suggests that spot diesel should rise 25 cents a gallon over the next six months and 41 cents a gallon over the next 18 months. americans who drive cars are no doubt aware of the drastic rise and fall in gasoline prices over the past few years. What they may not have noticed is the unusual movement in the price of diesel, a fuel primarily used in trucks, buses, railroad engines, farm equipment and boats. Historically, gasoline has commanded a premium over diesel, but that changed in mid-to-late 2007, when diesel rose above gasoline. diesel prices remained higher until the full brunt of the financial panic hit and the world economy slid into recession. Hard times depressed prices faster for diesel than for gasoline, restoring the historical relationship—for now (see box, page 4). on spot markets, diesel has sporadically risen above gasoline, but it's been rare for diesel to trade significantly higher on a sustained basis. 1 From 1994 through 2004, gasoline traded higher than diesel 61.2 percent of the time