Diesel Hits Record Price Levels
March 11, 2008

Automakers, especially European ones, hoping to make inroads in the U.S. with their diesel-powered cars may face a major obstacle: record prices for diesel fuel.

AAA reports the average nationwide diesel price has set records on 18 of the past 19 days, including Monday, when it hit $3.83 a gallon. Four states — New York, California, Pennsylvania and Vermont — reported average diesel prices above $4 a gallon Monday. “That really is unprecedented,” Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service, which compiles data for AAA, told The New York Times.

Meantime, oil futures rose to a record for the fifth day, rising above $109 a barrel in New York, Bloomberg reported Tuesday.

Prices Play Catch-Up
In the U.S., diesel and gasoline prices have lagged behind the big increase in the price of oil, as slack wintertime demand helped to suppress increases at the pump. But now both fuels are rising rapidly, The New York Times reported.

Gasoline was selling for a nationwide average of nearly $3.23 a gallon on Monday, a half-cent shy of the record set last May.

Diesel Demands Drives Price Hikes
Ironically, the auto industry itself is having a hand in higher diesel prices. The rising popularity of diesel vehicles in Europe increases demand for the fuel and decreases demand for gasoline, allowing European refiners to export their surplus to the U.S., which helps stabilize U.S. gasoline prices, Ron Planting, an economist at the American Petroleum Institute, told The New York Times.

In addition, diesel use is on the rise in fast-growing countries such as India and China, further driving prices higher.

Along with the law of supply and demand, investors are dashing to commodities such as oil, which further pumps up the price. The euro rose to $1.5489 against the dollar Tuesday, the highest since the single currency’s introduction in 1999, according to Bloomberg, attracting a lot of investors into oil.

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