The price of diesel fuel fluctuates over time. However, according to the U.S. Energy Information Administration (EIA), the price of a gallon of on-highway diesel fuel is comprised of four expenses — crude oil costs, refining costs, distribution and marketing costs, and taxes.

How do those factors rank in the amount of cost that they add to a gallon of diesel? The breakdown is like this: 

• Crude — 46% of the cost of diesel fuel

• Distribution and Marketing — 23% of the cost of diesel fuel

• Taxes — 17% of the cost of diesel fuel

• Refining — 15% of the cost of diesel fuel

While those numbers explain the cost involved in a gallon of diesel, what are the main factors that cause the price of diesel to fluctuate? Really, the increases and decreases are simply driven by one main factor, the price of crude oil.

Hamish Woodrow, head of strategic analytics at Motive, provided some insights.

“The number one thing that comes to mind, crude,” Woodrow said.

Crude oil prices, the cost per barrel, are fundamentally driving the price per gallon for diesel fuel, and the market looks at where the cost per barrel is coming from, he explained.

Other key factors coming into play are estimates of where demand will be.

“At the end of the day, it's supply-driven. So, we have a certain amount of supply. Where do we think the demand is going to be?” Woodrow said.

“Economic demand for both North America as well as global is going to be what drives the oil prices, and that is a huge component of what you get once it's on-the-road diesel prices,” Woodrow explained. “So, we've got other things that we can control in the U.S. as well. We have strategic reserves that can move things. We've also got taxes.”

“But oil is a global market, and so we get dictated a lot by what demand looks like across the world,” he concluded.