I’m pretty hot under the collar about diesel fuel prices. The current premium for diesel over gasoline is greater than 50 cents per gallon yet diesel fuel costs much less to manufacture than gasoline! Oil refiners make significantly more profit producing diesel fuel! Since demand for diesel in the U.S. is still increasing (approximately 3 percent/year), the price continues to climb. 

Diesel demand has decreased in many other countries. Japan and Spain have reduced their demand for diesel by 10 percent. Europe and the Pacific have reduced their demand for diesel by approximately 1 percent.  The demand for diesel in most other developed countries has decreased somewhere between these extremes.

It’s the developing nations that are driving the current increase in diesel fuel demand. Diesel demand in India is up 20 percent. China doesn’t report numbers, but it recently admitted stockpiling diesel fuel for the Olympics. Latin American nations are demanding more diesel to support growing economies. Oh yes, while doing research for this column, I found out that U.S. refiners are actually exporting diesel fuel to South America while charging us super-high prices. We’re even exporting gasoline to Venezuela!

I’m sure you all have seen oil company executives on television trying to explain away their current windfall profits. I watched the chief executive of the world’s largest oil company avoid several questions the other day on a morning news show. He did an artful job of dodging all those pointed questions.

So when is this going to change? Not soon. The reasons we have our current runaway diesel fuel prices are complex and not easily remedied.

First, years ago some enterprising oil company executives got the federal government to allow the oil industry to use last-in-first-out (LIFO) accounting practices. This means oil companies utilize the current market price for crude as their actual cost. They would have unbelievable profits if they had to use the real cost of the crude they own.

Remember, they only import 50 percent of the crude they refine. I don’t know how we can eliminate that practice.

Secondly, for years rising demand for gasoline drove the way refineries were designed and built (gasoline demand is now decreasing). All current refineries in the U.S. were designed to optimize gasoline production at the expense of diesel fuel production. Several refineries have projects on the books to increase diesel fuel yields, but we won’t see any relief for one or two years.

There are also projects on the books to increase oil exploration and the number of refineries, but environmentalists have done everything in their power to stall them.

Now I’ve learned that Saudi Aramco and Total (a French company) are planning a 400,000-barrel-per-day refinery to be on stream by 2012. Saudi Aramco and ConocoPhillips are also planning a 400,000-barrel-per-day refinery to go on stream by 2013. These refineries will be built in Saudi Arabia. Is this really such a good idea?

So what are we doing in this country to remedy the present situation? Democrats are proposing a windfall profits tax on oil marketers. Want to guess who will pay for that? Republicans are arguing to increase oil exploration. No politician is addressing the fact that our refineries can’t refine sufficient diesel to meet our needs. Can’t we try to worry more about our country’s future and less about politics?

We actually need to do at least three things:

1. Decrease our demand for diesel fuel as much as possible.

2. Allow oil refiners to reconfigure refineries to produce more diesel fuel.

3. Develop a national energy policy independent of lobbyists and politicians.