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More Datapoints on the Rise of Diesel

• August 22, 2012 • 11:23 AM

Thanks to a particularly devastating refinery fire in the Bay Area that sucker-punched California supplies, the spot price for diesel fuel set a record premium to the price of futures contracts (http://www.bloomberg.com/news/2012-08-21/san-francisco-diesel-jumps-to-record-premium-to-futures.html) on the New York Mercantile Exchange. That’s not the same as a record price, but it does show that the supply-demand equation is out of whack.

That news provides a timely endorsement of one premise in Lisa Margonelli’s piece on the second coming of diesel that we posted earlier. As she wrote:

For many years in the U.S., diesel was gasoline’s low-priced, industrial cousin, used largely for trucking and industry. But diesel’s growing role as insurance and as a “bridge” fuel has solidified into a global diesel economy, increasing the price in the U.S. so much so that it’s often more expensive than gasoline.

While the local spike in price is mostly traceable to the knocked-out Chevron refinery, diesel has been on tear nationally—up 22 cents from last year’s price—and globally. In two giant but more controlled markets, China is reportedly thinking of raising its petroprices, while Indian officials envision “fiscal devastation” if the consumer price of diesel isn’t raised to lower the government’s subsidy burden.

Besides higher prices, the wider demand Margonelli sketched is driving these actions. As a car-oriented Indian website reported today:

“Diesel being a subsidised fuel meant to serve industrial purposes, trains, power plants and heavy vehicles, among others, has now reached the unanticipated pockets of the economy like passenger cars and private homes.”

Michael Todd
Most of Michael Todd's career has been spent in newspaper journalism, ranging from papers in the Marshall Islands to tiny California farming communities. Before joining the publishing arm of the Miller-McCune Center, he was managing editor of the national magazine Hispanic Business.

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