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Economies world-wide are significantly affected by changes in the source and the price of diesel fuel. Diesel is essential to the transportation industry, which in turn is a component of all segments of the economy. Along with every rise in the price of diesel, the cost of transporting products goes up, and therefore the price of the product goes up, also. You need to know the cause in order to find a way to slow down the increases.
You will find some fundamental determinants of the cost of fuel. The cost of crude oil is definitely the single greatest determinant, accounting for about 60% of the overall cost. Crude oil still has to be processed, an operation whereby low-sulfur diesel and some other petroleum products are removed. A barrel of crude is processed to make roughly 10% of a barrel of diesel, and this accounts for about 20% of the price of diesel.
The final price of diesel is reached by adding the marketing costs, distribution costs and taxes levied by authorities. Any kind of fuel manufactured in the country carries a ten percent excise tax added onto it. Domestically refined fuel is usually cheaper because foreign fuel, while avoiding the excise tax, has to pay an import tax, Selling and dispersal may only account for 5% of the price, but these two inputs are what diesel's value is most sensitive to. Because of the worldwide applicability of the law of supply and demand, if the supply falls or the demand increases, the price of fuel will rise. If supply stays unaltered it means steady prices and if demand then falls prices could well go down.
Anytime a country relies on another country for their oil, the cost they have to pay can be determined by the stability of the other country. Embargoes and wars usually mean an increase in the price asked for crude oil, which in turn means an increase in the price of diesel. There are numerous variables that can result in another country to raise its prices, but for the most part, whoever is willing to pay the most money will get what they need. During specific times of the year the price at the pumps goes up, which is probably because of greater than usual travel volumes. This equals higher demand, which translates into higher prices.
Sometimes the cost goes up should there be a forced shortage, which can happen when the supplying country is at war, or maybe just trying to prove a point. Unfortunately the customer is left with the bill anytime oil companies prefer this way of competing for business. The best thing for you to do as a consumer is to just discover ways to cut your fuel consumption.
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