State of Fuel Industry: Will EVs kick out gasoline and diesel?

State of Fuel Industry: Will EVs kick out gasoline and diesel?

Photo: Work Truck

Gasoline and diesel fuels have been the backbone of the work truck industry for decades.

However, in recent years, the industry has faced pressures from supply chain restraints, the COVID-19 pandemic, and the push to transition toward sustainable alternatives.

With fleet managers, governments, and consumers increasingly prioritizing clean energy solutions, the future of the fuel industry is in flux.

While some experts predict a gradual decline in traditional fossil fuels, others believe that innovation and technological advancements will allow the industry to adapt and thrive.

We will explore the history and current state of the gas and diesel markets and examine how these fuels are likely to evolve in the coming years.

Diesel Prices Remained Constant Before 2020

Before the COVID-19 pandemic, the diesel industry was relatively stable, with prices fluctuating based on supply and demand.

In the United States, diesel fuel prices were generally higher than gasoline prices due to higher refining costs and taxes.

According to the U.S. Energy Information Administration (EIA), the average retail price for diesel fuel in 2019 was $3.06 per gallon, with prices varying by region and season.

Globally, diesel fuel prices were influenced by geopolitical events, such as OPEC production cuts and economic sanctions on oil-producing countries.

The diesel industry was characterized by steady demand from the transportation and construction sectors, with ongoing efforts to improve fuel efficiency and reduce emissions with cleaner-burning diesel engines and alternative fuels such as biodiesel.

Gas Prices Were Stable Before 2020

The gasoline industry was also relatively stable before 2020, with prices influenced by various factors, including crude oil prices, refinery capacity, seasonal demand, and taxes.

In the United States, gasoline prices fluctuated throughout the year. Generally, they followed a predictable seasonal pattern, with prices typically highest in the summer months due to increased demand for travel.

According to the EIA, the average retail price for regular gasoline in 2019 was $2.60 per gallon.

Like diesel, gasoline prices were also affected by geopolitical events and global supply and demand, with prices sometimes impacted by natural disasters or refining or transportation infrastructure disruptions.

The annual retail gasoline and diesel prices from 1994 to 2022.

The annual retail gasoline and diesel prices from 1994 to 2022. 

Photo: EIA/Work Truck

Current Trends Impacting Prices

Diesel and gas prices remained stable before 2020, but after 2020, things went downhill (or uphill for prices).

The average price of diesel for 2022 in the U.S. was $4.99 per gallon, while gas was $4.059. The impact of current oil prices comes down to supply and demand.

If we expand on that, current trends in diesel and gas prices can be broken down into three factors: fluctuating demand, extreme weather, and war.

Fluctuating Worldwide Demand — Although the U.S. produces most of its crude oil in the states, America still imports and exports diesel and gas from other countries and is not immune to the effects of global supply and demand.

When the world started to recover from COVID-19, demand increased. The U.S., Europe, and especially China in the past few years have steadily increased diesel consumption. According to CeicData, China’s diesel consumption has increased in almost every city from 2016 to 2019.

On the other hand, gas consumption is on a prolonged decline. This could be contributed to the rise in EVs and incentives to purchase them across America.

According to the EIA, America’s capacity to refine crude oil into fuel and other products hit its lowest levels in 2022 since 2014. Less gas produced also contributes to a fluctuation in prices. As a result, U.S. oil refiners have cut back to stay profitable, and some have even shut down.

Extreme weather — Several extreme weather events occurred that have affected the price of oil in recent years.

In December 2022, an extreme winter storm passed across North America, and with it, blizzards, high winds, and cold temperatures. Gas consumption surged, and production rapidly fell. This resulted in the need to import more gas and the prices to rise.

Other extreme weather events that happen often are hurricanes. In 2022, three hurricanes made landfall, and 14 total named storms. Half the nation's petroleum and natural gas refinery capacity is on the Gulf Coast.

War — On February 24, 2022, Russia launched a military invasion of Ukraine. Oil prices were already rising, and the Biden administration's Russian oil import ban surged prices even more.

According to World Economic Forum, strong economic recovery tied with low investment in oil production grew worse by the Russian invasion of Ukraine.

As of 2023, prices have calmed down and are slowly recovering from the 2022 highs. Of course, there is another player on diesel’s and gas’ heels, the electrification push…

Will EVs Kick Diesel & Gas Out of the Playing Field?

With current laws throughout the U.S. trickling in to ban diesel engines soon, does this mean the price of diesel will go up or down?

In its recent outlook as of March, the EIA predicts that global consumption of liquid fuels such as gasoline, diesel, and jet fuel will reach new heights in 2024.

The 2023 average consumption prediction is over 100 million barrels per day and over 102 million barrels per day in 2024.

The price of gasoline in the U.S. is closely linked to crude oil, and the EIA predicts that there will be significant reductions in the price at the pump compared to 2022.

According to the EIA, the average U.S. gasoline price is expected to be approximately $3.30 per gallon in 2023 and $3.10 per gallon in 2024.

EIA Administrator Joe DeCarolis stated that the reduction in gasoline prices would result from the lower crude oil prices and reduced refinery margins, bringing gasoline prices down from their highest 2022 levels.

However, DeCarolis cautions that the forecast for global petroleum consumption and price depends on uncertain economic conditions, particularly in China. Any changes in China's economy following the pandemic lockdowns could significantly impact global petroleum consumption.

So diesel and gas are still leading the fuel game for the next couple of years.

Gas Vs. Diesel — Who Will Rise to the Top

Diesel wasn’t always the top dog.

Since September 2004, diesel fuel prices have continuously been higher than regular-grade gasoline prices on a dollar-per-gallon basis.

Aside from cold winters with higher diesel demand, a deviation occurred to switch the prices and has remained that way ever since. The reasons for the shift are broken down into three reasons:

  1. Demand for diesel fuel is now higher than other distillate fuel oils, particularly in Europe, China, India, and the United States. According to Diesel Technology Forum, diesel-fueled trucks make up 76% of all commercial trucks in the U.S.
  2. The transition to less-polluting, lower-sulfur diesel fuels in the United States affected diesel fuel production and distribution costs.
  3. The federal excise tax for on-highway diesel fuel is 24.3 cents per gallon, 6 cents per gallon higher than the federal excise tax on gasoline.

Will gas prices ever surpass diesel like before 2004? If some of the potential possibilities occur, then it is possible. For gas prices to rise higher than diesel prices, the following would have to happen:

  • A significant increase in demand for gasoline due to seasonal changes, and the gasoline supply cannot keep up with this demand.
  • If refineries that primarily produce gasoline experience outages or cannot produce enough gasoline.
  • If the taxes on gasoline increase more rapidly than those on diesel fuel.
  • If environmental changes increase the cost of producing gasoline more than diesel fuel.

In the end, diesel and gas prices are influenced by various factors that can be hard to predict, not just in the long term but also short term. That’s why for fleet managers, staying informed about the latest developments in fuel prices allows for more informed decisions and better management of finances.

Stay tuned for the next State of the Fuel Industry featuring alternate fuels!  

About the author
Hillary Weiss

Hillary Weiss

Senior Editor

Hillary Weiss is a former senior editor at Bobit. She has a decade of digital publishing experience and a passion for all things related to fleets.

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