Diesel Car – a Hit to the Wallet: Explaining Why It Happens

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Do you think gasoline prices are rather high? If you own a car and have filled it up with regular gasoline this year, you probably know about the rising costs. It’s not yet time to learn more about paydayloans in Ontario because the recent high gasoline prices have come down a bit, which is not the case with diesel prices. It’s the fuel oil that drives the world economy.

Keep on reading to learn about the current average retail price of diesel in Canada to compare it with regular gasoline and understand what industries are affected by rising diesel prices.

What Is Happening with Diesel Prices?

Car owners have already experienced increasing gasoline prices this year. But if you think regular gasoline is expensive, you should take a look at diesel prices. As inflation rates keep on rising in Canada as well as in many other countries around the world, so do diesel prices. We will talk more about the reasons why it happens. Yet, the impact of rising diesel prices drives other prices up and makes inflation even worse.

Source: https://www.nrcan.gc.ca/home 

Let’s compare the daily average retail prices for diesel and daily average retail prices for regular gasoline in Canada in 2023. We can notice that the average diesel price was 205.7 cents per liter on the second of January, 2023. The daily average retail price for regular gasoline was lower at 150.5 cents per liter on the same day.

The Effect of Surging Diesel Prices on Different Industries

Here is how various industries are already affected by increasing diesel prices:

Construction

The construction sector depends on diesel. It represents a high portion of the energy consumption in this industry. The construction industry uses diesel for pile drivers to strengthen foundations, for graders to move soil, and for excavators to dig foundations. 

All the equipment and cranes needed to remove the building or construct the new frame for its structure are used by diesel trucks. If you are planning to expand your home or apartment, new home construction also depends on diesel prices. Keep in mind that diesel trucks will also deliver all your supplies and home appliances.

Agriculture

The largest part of farm equipment depends on diesel. It is necessary to power it. Seeding and plating equipment, tillage machines, and plows run on diesel. The harvesters that are used when the food is grown also operate on diesel. 

The monetary picture of Canadian farmers is complicated by rising costs of inflation and diesel prices. Not all farmers may have enough funds to pay for the diesel to finance planting and gathering crops. As a result, smaller crops may be planted this year, and food prices will eventually increase again.

Mining and Manufacturing

The manufacturing and mining industry also depends on diesel as a major fuel. Logging, mining, and manufacturing equipment are all powered by diesel. This equipment helps to create and manufacture services and goods Canadians utilize daily. 

For instance, diesel usually fires steam boilers for textile factories and chemical plants. Diesel generators also help various industrial facilities to supply backup power, which is meant for electric utilities, office buildings, hospitals, and institutional facilities.

Transportation

This industry still depends on diesel as well. The majority of goods are imported from other countries to Canada, so they most likely get here on trucks or ships. Although there are some electric vehicles and alternative fuels these days, trucks and ships rely on diesel. 

Hence, if you are considering moving into a new apartment or home, you will most likely hire trucks powered by diesel to carry your belongings.

Reasons Why Diesel Will Remain Expensive

Gasoline markets in North America are divided into five zones. They are called the Petroleum Administration for Defense Districts (PADD). Demand is high, and supply is limited in the PADD-5 district, which includes British Columbia. 

Thus, fuel from the other four districts moves around in order to meet this need. It boosts the prices everywhere. The one who is ready to pay the higher price will win the product, as the number of barrels is limited.

We have already compared the average daily prices of gasoline and diesel. Besides, Alberta prices are typically lower compared to those in other provinces across Canada. Pump prices jumped from $1.50 per liter to over $1.60 last week. Prices in Alberta are higher by 10 percent compared to 20 percent in British Columbia.

Russia’s invasion of Ukraine is another reason for skyrocketing diesel and gasoline prices. As diesel prices keep on rising, they put a financial strain on thousands of Canadians who own diesel cars. 

Even though regular gasoline isn’t as cheap as it used to be, diesel is what generally moves construction equipment, trains, tractors, and trucks. Diesel prices are really high these days, which also brings up the costs of various services and goods.

What Affects Diesel and Gasoline Prices

Although many autos run on regular gasoline and the surge in rising diesel prices hasn’t brought the attention of politicians yet, diesel prices remain a major source of economic pain. These prices affect the cost of most products and services, which also affects inflation and the economy. Even though not many politicians currently pay much attention to these prices, consumers have to deal with them and pay for everything.

Both diesel and gasoline prices are connected to the price of oil. These prices went up straight away after Russia invaded Ukraine last February. But the costs of diesel and regular gasoline increase not in the same way. The gasoline cost went up 11 percent, while the diesel price has skyrocketed by over 40 percent over the past year.

The Bottom Line

Should you purchase a diesel car in 2023? Should you sell your diesel car instead? We can’t say for sure what the future of diesel cars will be. The truth is that the market share of these types of autos has lowered dramatically in the last two years. If you consider the falling residual values for these autos and the rising costs of diesel, more and more drivers choose alternative options.

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