State of the Fuel Industry 2024

From moving freight to keeping work trucks on the road, fuel keeps the tires turning regardless of whether trucks are filled with gasoline, diesel, compressed natural gas, propane, or hydrogen. Of those options, diesel and gasoline still lead the way in powering commercial vehicles.

In a time when fuel prices remain much higher than just a few years ago, both on-highway diesel and gasoline prices remain close to where they were a year ago.  According to the early-April pricing report from the US Energy Information Administration (EIA), the US average diesel price was $4.061, or 3.7 cents cheaper than the same time in 2023. Gasoline also priced slightly cheaper, down half a cent from a year ago.

What Drives the Prices of a Gallon of Gasoline or Diesel?

As fuel costs rise and fall, the components that make up the total price of a gallon of diesel fuel differ in key ways from the pricing components of a gallon of gasoline, according to the EIA Gasoline and Diesel Fuel Update.

Four key elements make up the price of a gallon of diesel, and also gasoline. Those are:

• Price of crude oil
• Refining cost
• Distribution and marketing cost
• Federal and state taxes

Within the price of gasoline, crude oil comprises 57% of the cost of a gallon. However, crude oil only accounts for 45% of the cost embedded in the price of a gallon of diesel. That is because refining diesel is significantly more costly per gallon than gasoline.

Crude oil production in the US, measured by EIA in thousands of barrels per day, saw a steady climb in production beginning in October 2016, when 8,803 thousand barrels per day were produced. Production continued to climb steadily and peaked at 13,000 thousand barrels per day in November 2019. But production soon plummeted, dropping from 12,795 thousand daily barrels in March 2020 to 9,714 thousand barrels daily in May 2020.

From that point forward, production numbers have fluctuated but overall followed a trending increase that peaked at 13,295 thousand barrels per day in December 2023. From there, production dropped again in January, 12,533 thousand barrels per day.

Refining makes up 14% of the cost of a gallon of gasoline, yet it amounts to 22% of the embedded cost of a gallon of diesel.

Taxes impact the cost of both diesel and gasoline nearly the same — 16% of the cost of a gallon of gasoline and 15% of the cost of a gallon of diesel.

Where the two differ in price composition, other than crude and refining, is the cost of distribution and marketing — 13% of the cost of gasoline comes from this, but for diesel it jumps up a bit to 19%.

“According to the Energy Information Administration, their short-term energy outlook, they see diesel prices through 2025 pretty much flat around $4 a gallon, just maybe a couple of pennies one way or the other, but fairly stable there,” says Allen Schaeffer, executive director of the Engine Technology Forum (formerly the Diesel Technology Forum). “I think that reflects sort of a fairly stable price of crude as well.”

Diesel and Gasoline Pricing Trends of the Past 12 Months

When looking back at the average price of a gallon of diesel and gasoline over the past 12 months, both peaked a few months heading into the fall of 2023.

The US average diesel price for a gallon peaked at $4.633 on Sept. 18, and at that time the price in California was $6.192. However, as the national average price started trending downward near the start of October, California prices hit a peak. The California average price for a gallon of diesel reached $6.269 on Oct. 2.

Diesel Still the Prevalent Fuel for Commercial Vehicles in the US

According to the Engine Technology Forum, 76% of Class 3 to Class 8 commercial vehicles operating in the US run on diesel. The breakdown of fuel sources, according to percentage of commercial vehicles, is:

• Diesel – 76%
• Gasoline – 23%
• Compressed Natural Gas (CNG) – .5%
• Other – .9%
• Electric – .1%

Among the larger commercial vehicles, a majority rely on diesel, including:

• 97% of Class 8 trucks
• 77% of transit buses
• 90% of school buses

“The majority of diesel fuel consumption is from the commercial trucking sector, it runs about two-thirds,” says Schaeffer.

While diesel may be king among commercial vehicles, in recent decades its use as a fuel has grown in the non-commercial market as well, Schaeffer explains. He notes there are about 130,000 gas stations and convenience stores selling fuel across the US.

There once was a time when diesel pumps would be located behind or off to one side of the establishment and never alongside gasoline pumps at the main island. But that, he says, has changed.

“Almost every new installation of convenience store and retail fueling out there has diesel pumps incorporated right into the island,” Schaeffer says. That is powered by consumers driving larger, diesel-engine trucks like Ford F-350s or GMC 2500s every day.”

Renewable Diesel a Growing Option Across the US

Renewable diesel, a fuel made from fats and oils and processed to be the same chemically as petroleum diesel, is growing in use across the country. While not too long ago it was primarily found along the West Coast, it has now spread into the Midwest and further east to places like New York and Georgia.

Schaeffer says renewable diesel is growing in capacity at about 30% annually. By 2025, he says, renewable refining capacity will be at about 300,000 barrels per day.

The Clean Cities Alternative Fuel Price Report, published by the US Department of Energy, quarterly provides pricing data for renewable diesel and other alternative fuels. In January, the report showed that in California the price of renewable diesel, $5.57 per gallon, was slightly above the price of a gallon of petroleum diesel, $5.53 per gallon.

Renewable diesel is gaining in popularity and in April both Volvo Trucks North America and Mack Trucks announced they are fueling Class 8 trucks with hydrotreated vegetable oil (HVO), a form of biodiesel, when they leave assembly lines. Later this year, that approach will reach medium-duty trucks when Mack starts fueling the Mack MD with renewable diesel when it leaves the production plant.

HVO is a renewable fuel that can be used in the same engine as fossil-based diesel without requiring engine modifications. Produced from renewable sources such as waste vegetable oils and animal fats, it has the same chemical structure as fossil-based diesel and can be used as a direct replacement to reduce greenhouse gas emissions while maintaining engine performance.

One consideration of using HVO is that it does not require separate storage or fueling infrastructure. Renewable diesel at any blend up to a maximum of 100% (RD100) that conforms to ASTM D975 or EN15940 will not adversely affect engine or aftertreatment performance or durability, according to Volvo.

CNG and RNG Offer GHG Emissions Advantages

While compressed natural gas has seen acceptance more readily in municipal and refuse collection roles, it now appears to be becoming more of a mainstream option for trucking at all levels.

Cummins’ launch of its X15N 15-liter CNG engine has now brought natural gas power to one of the largest commercial transportation consumers of fuel, heavy-duty trucking. That means not only can long-haul operations now see CNG as a viable fuel source, but vocational fleets can as well.

CNG provides lower cost at the pumps and is measured in gasoline gallon equivalents (GGE). The national average price for CNG from Jan. 1 to Jan. 15 in the US was $295/GGE, compared to gasoline at $3.06 per gallon and diesel at $3.94 per gallon.

But a new segment of CNG continues to grow — renewable natural gas (RNG), which produces natural gas through methane capture. Often, the methane is captured at dairy farms or landfills and prevents methane from going into the atmosphere and is touted by many who say it has a negative impact on greenhouse gases.

Of the natural gas used in transportation, about 70% is now RNG, according to the North American Council on Freight Efficiency (NACFE).

Hexagon Agility, a manufacturer of tanks and high-pressure fuel systems, provides a comparison between RNG, CNG, and other fuel sources as measured through the lens of well-to-wheel CO2 emission savings.

According to that data, which was taken from various reports, CNG’s well-to-wheel CO2-eq emissions are 543 g/km. However, RNG produced by manure has a beneficial effect on the atmosphere by producing -745 g/km. RNG captured, other than through manure, is slightly positive at 147 g/km but lower than most other alternatives, according to Hexagon.

The NACFE report Natural Gas’ Role in Decarbonizing Trucking notes that natural gas produces about 27% less CO2 per unit of energy on a fuel-comparison basis compared with No. 2 diesel. The report also points out that a natural gas engine is less efficient than diesel, plus the natural gas needs to be compressed, unlike diesel.

Propane Potentially Offers Fleets Savings

About 65,000 vehicles in the US run on propane, according to Tucker Perkins, president and CEO of the Propane Education and Research Council (PERC)

Perkins says propane has been around as a vehicle fuel since about the 1940s and gained in popularity until the EPA changed regulations in 1991. However, he says in the last 10 to 15 years there has been a resurgence in fleets returning to propane.

Why is propane gaining ground on primary fossil fuels like gasoline and diesel? Perkins says it is because fleets find significant cost savings when they turn to propane.

“We never see a fleet whose cost of operation is less than 50% savings. Most of them are 50 to 53, maybe 60% savings per mile,” Perkins explains. “So, we've always been cheaper and I don't mean just when we had Arab oil embargoes or gasoline goes to four or five bucks a gallon. If you look at it over time, it’s always been cheaper.”

The national average price of propane in January was $3.49 per gallon compared to diesel at $3.94 per gallon, according to the quarterly Clean Cities Alternative Fuel Price Report. Average gasoline prices, according to the same report, were $3.06 per gallon.

Hydrogen Path Via Fuel Cell or ICE

Will hydrogen become a viable alternative to fossil fuels? Time will tell, but will the advantages come in the form of hydrogen fuel-cell vehicles or internal combustion engines (ICE) that run on hydrogen?

Hydrogen is the most abundant element on earth and is a secondary source of energy, according to the Engine Technology Forum. It stores energy produced from other resources such as fossil fuels, water, and biomass.

ICE Technology Isn’t Dead — Look for These Gains Ahead

One common way of producing hydrogen is by passing electricity through water, a process accomplished by an electrolyzer. But, even before the electrolysis, the water must be purified. Both the purification and the electrolysis need to be powered by electricity. In Germany where there is ample wind power, both steps are commonly done through clean energy electricity. But, there is not the same capability yet to produce that clean-energy propane here in the US at scale yet.

So, when discussing the adoption of hydrogen as a vehicle fuel, one must consider whether brown (coal) or green (wind or water power) produced that electricity. Where that electricity comes from swings just how effective hydrogen can be as a fuel in terms of reducing environmental impact.

According to Hexagon Agility, a company that produces high-pressure tanks for compressed gas including hydrogen, the well-to-wheel emissions are significantly lower for green hydrogen (10 g/km7) than that created from natural gas (504 g/km7).

Rocky Mountain Institute (RMI) worked with NACFE on Run on Less with Hydrogen Fuel Cells and reported one advantage is that once compressed hydrogen can offer greater energy density than diesel or even gasoline. What that means is about 1 kg of hydrogen, used in a fuel cell to power an electric motor, produces about the same energy as a gallon of diesel.

Hydrogen also is dispensed in a similar form to traditional fueling, but the challenge is to make it available to fuel trucks in the same amount of time as fueling with diesel or gasoline. Although hydrogen fueling can appear similar to a regular pump, the hydrogen gas is compressed to 700 bar. For reference, CNG/RNG are only compressed to 200 to 250 bar. It is that 700 bar compression that gives hydrogen the needed energy density.

Decarbonization is Not a Clear-Cut Path

The drive to lower or zero emissions could take a variety of directions or even multiple directions. But in all cases, the balancing factors are the cost for fleets to convert to an alternative powertrain and the availability of the needed infrastructure.

Battery-electric trucks are finding a place in some places, like California mandates a clean-energy transition for some classes of commercial vehicles and incentives to lower the cost of new vehicle purchases.

However, there is not a broader charging infrastructure in place to allow the EV market to support the wide-ranging needs of commercial trucks, whether local, regional, or long haul.

There is a gap between the trucking and commercial vehicle world’s reliance on fossil fuels and where they will be one day in a zero-emissions world. That gap is what NACFE calls “The Messy Middle.”

Whether a company finds its answer with battery-electric, CNG/RNG, propane, or hydrogen will determine the specific needs of its fleet.

In that Messy Middle there is no clear-cut answer, but as long as fleets seek out and follow the best path for their needs they can eventually reach decarbonization goals, even if it takes multiple steps and transitions along the way.