current diesel fuel pricing

Murphy oil at wally world last week $2.999. Didn't price the diesel.

It's approximately the same, about $1.40 or $1.50 difference from gasoline in our area.

I miss the days when diesel was cheaper than gas.

In my area the price has only come down about a buck since its high point. Hopefully it keeps dropping.

It's a market thing.

Diesel is primarily serving commercial operators. They have to buy X gallons per week regardless of the price. Efficiency is always important. Even with low fuel prices, fuel is still a major cost of business. The result is diesel prices tend to be inelastic. That means they tend to be slower to go up and down.

Gasoline is primarily used by private individuals. Particularly when fuel prices are low, they tend to be less focused on efficiency, so when prices rise, they have more ability to reduce consumption. It could be as simple as easing off the throttle. It could be taking the compact car instead of the big truck. It could be skipping an optional trip. With a major price spike like we just went thru, it's not hard for a typical family to cut 10-30% off their gasoline consumption. The result is gasoline prices tend to be more elastic and thus go up and down faster as they try to react to the changes in demand.

Pretty much the same thing here. I bought my first diesel pickup in 2004 when diesel was cheaper than gas. About 6 months later it reversed and diesel had been higher ever since.

TOO HIGH...

valhalla360 wrote:
The result is diesel prices tend to be inelastic. That means they tend to be slower to go up and down.

That's not what elasticity is. It has nothing to do with any stickiness or lag in price adjustments. It has to do with the demand for a good through a range of prices.

"Price elasticity" means that the change in price has little affect on the shape of the demand curve.

You're kind of in the ballpark in that fuel tends to be price inelastic compared to other goods, but not because of a time lag.

Elasticity boils down to how much you really need something. My demand for ice cream would be pretty flat from $0 to $6 per carton, but then at $7/carton my demand would taper off and I'd either look for substitute goods or just do without.

My demand curve for oxygen is perfectly flat. I always want the same amount. Thank God it's free, but if you raised the price I'd still want the same quantity. My demand for oxygen is perfectly inelastic.

Our demand for fuel is relatively inelastic compared to things like ice cream. But "inelasticity" refers to the fact that our demand doesn't change a lot based on the price.

Elasticity has nothing to do with a lag in the prices based on supply.

(And there are tons of other things that impact the shape of a demand curve besides the price of the good, like price and availability of substitute goods.)

dedmiston wrote:

valhalla360 wrote:
The result is diesel prices tend to be inelastic. That means they tend to be slower to go up and down.

That's not what elasticity is. It has nothing to do with any stickiness or lag in price adjustments. It has to do with the demand for a good through a range of prices.

"Price elasticity" means that the change in price has little affect on the shape of the demand curve.

You're kind of in the ballpark in that fuel tends to be price inelastic compared to other goods, but not because of a time lag.

Elasticity boils down to how much you really need something. My demand for ice cream would be pretty flat from $0 to $6 per carton, but then at $7/carton my demand would taper off and I'd either look for substitute goods or just do without.

My demand curve for oxygen is perfectly flat. I always want the same amount. Thank God it's free, but if you raised the price I'd still want the same quantity. My demand for oxygen is perfectly inelastic.

Our demand for fuel is relatively inelastic compared to things like ice cream. But "inelasticity" refers to the fact that our demand doesn't change a lot based on the price.

Elasticity has nothing to do with a lag in the prices based on supply.

(And there are tons of other things that impact the shape of a demand curve besides the price of the good, like price and availability of substitute goods.)

Never said that's "what it is". It's the net result of inelasticity though that means diesel price tends to move differently from gasoline.

If you have a quick spike or drop in oil prices, commercial operators (ie: diesel buyers) keep buying the same amount. Personal drivers (ie: gasoline buyers) though can cut/increase their consumption based on the price. The result is the market swings more quickly chasing the demand changes of gasoline buyers faster than it chases diesel buyers. Since we are currently on a down swing, gasonline is leading the way well ahead of diesel prices.

While there are other factors, for all practical purposes in the short term, there are zero substitutes. I mean, sure you can fill your big rig with gasoline but it's not going to work out well. Multi-fuel vehicles really have never caught on in a big way (there are a few exceptions but they big enough to really move the market). If prices stay high for a long period of time (say 3-4yrs), you may see a move to alternatives as trucks age out and are replaced with alternatives but that takes a lot of time and commercial operators need to believe the high prices are here to stay.

The spread here in northern Kentucky is currently $1.75

I hope the delta gets to about $3/gallon....I'd like a new diesel pickup for cheap!