What Affects the Price of Marine Diesel Fuel?
We’ve all watched as the price of marine diesel fuel has fluctuated over the years. When there’s a downturn in price, no one complains of course. When there’s a spike though, no one’s happy and they’re not too shy to talk about it. Everyone is sounding off with their theories about what (or who) is responsible for the price of the marine diesel you buy at the dockside. But are any of these theories true or close to the truth?
Find out what really affects the price of marine diesel over time in this article from Mansfield Service Partners.
What Determines How Much Marine Diesel Fuel Costs?
The short answer is, it’s complicated.
We all wish there was a simple answer for frustrating increases in the price of marine diesel and HFO, not to mention the gasoline most of us use in our daily driving. Unfortunately, there really isn’t. The truth is that oil is a hot commodity — it is essential for so many things. Without heavy fuel oil, more than 75% of the things we buy at the store would be sitting on docks thousands of miles away.
The truth is that marine fuel prices are affected by a dozen or more different factors that can either work in our favor and cause a dip or cause the price to go up. The free world’s governments generally do what they can to smooth the peaks and valleys, but they can only soften the blow, not keep the price on a flat line.
Major Factors That Affect The Price of Marine Diesel Fuel
Crude Oil Prices
No surprise this is at the top of our list. The cost of crude oil is the largest component in the retail price of marine diesel fuel and HFO. Worldwide crude oil demand and supply determine crude oil prices. World economic conditions contribute to the demand and supply of petroleum products made from crude oil. OPEC exports 60% of the oil traded internationally
OPEC and OPEC+ member countries collectively agree on production levels and quotas. They regularly assess global supply and demand dynamics, geopolitical factors, and inventories. They use that info to adjust production levels to raise (or lower) the price. Changes in OPEC’s production levels can significantly impact global oil prices, and consequently, the price of marine diesel fuel. Oil is a commodity and has set prices, so the prices and supply determined by OPEC affect the price of oil here at home.
Supplies of Crude Oil and Lifting Costs
Why don’t we drill more at home? Well, that’s a good idea in that it helps us ensure a secure supply. But the truth is most of the easy-to-get-at oil in America got pulled out of the ground a long time ago. Now we have to drill a lot deeper and even sideways to get at what’s left and that gets expensive.
So, strange as it may seem, overseas oil usually ends up being cheaper for us to buy than the oil we get at home. That doesn’t mean we shouldn’t drill here of course, but it does mean that drilling at home doesn’t often help lower the price of oil, and, by extension, marine diesel fuel.
Cost of Refining Marine Diesel and Profits
Refineries process crude oil into marine diesel fuel. The refining process, along with distribution and marketing, contributes to the final price of marine diesel and HFO. Refineries’ operational costs, maintenance, and efficiency all play a part. If a refinery has an explosion or accident or a pipeline gets damaged, that can drive diesel and gasoline prices up as the refiner tries to recover from their losses.
Distribution and Marketing Costs of Marine Diesel
These costs include the transportation of diesel fuel from refineries to distribution centers and retail locations. Any disruptions in this supply chain, such as pipeline outages or refinery shutdowns, can lead to price increases. During COVID supply lines were interrupted in several places. Truckers were too sick to drive, and workers at refineries and drilling sites couldn’t come in to work either. Remember it takes a whole lot of folks doing their jobs to get that marine diesel fuel delivered to your marina.
Federal, State, and Local Taxes
Naturally, taxes have an impact on the final price of diesel fuel. The federal excise tax for on-road diesel fuel is 24.3 cents per gallon, and the federal Leaking Underground Storage Tank fee is 0.1 cents per gallon. Here in Texas the state also adds another 20 cents per gallon in tax. Then you’ve got sales tax on top of that. There is a little bit of good news though, you may be eligible for a diesel fuel tax refund — you can find details and links for the states that offer it on this American Boating Association page.
War, Unrest, and Natural Disasters
These factors are hard, if not impossible to predict. When war breaks out anywhere it can rattle the global economy and affect oil prices and that can raise the price of diesel fuel. The current conflict in Ukraine is a good example. War requires more oil and diesel fuel than usual. That increases demand.
Of course, war can also disrupt supply lines or even break pipelines, or destroy refineries or storage tanks. In the case of Ukraine, Russia also has something to gain from higher oil prices since it raises a lot of money by selling oil to China and India. Geopolitics is like 3D chess, but take our word for it — it’s a significant factor in maritime fuel prices.
Mansfield Service Partners for Marine Diesel Fuel Delivery
Marinas, fishing fleets, cargo fleets, passenger vessels, and more rely on Mansfield Service Partners for reliable delivery of high-quality marine diesel fuel.
Mansfield Service Partners has been the fuel supplier people trust since 1932: on-time fuel delivery, and quality. From 24-hour fuel delivery to industrial lubricants, DEF, and environmental services, like used oil collection — we’ve got everything you and your business need.
Contact Mansfield Service Partners for your business today. Reach us at (800) 683-1331 or email any inquiries to info@mansfield.energy
