Upset with the high price of diesel fuel? The biggest share of the blame falls on state and federal governments.

As with all commodities, the laws of supply and demand play an important role in the cost of fuel. However, the taxes imposed (user tax) on fuel plays a great role in fuel’s high cost.

Diesel-operated vehicles transport nearly 70 percent of the nation’s goods. Businesses pass taxes onto consumers in the form of higher prices for goods and services. The effect of taxation on fuel then affects the cost of goods and services. In return, this provides the federal and state governments with additional sales tax revenue generated from the higher-priced goods — a never-ending spiral it would seem.

An independent trucker operating one truck can easily purchase 125 gallons of diesel each day. A medium-size trucking company can purchase 25,000 gallons per day, while a large company could purchase 250,000 gallons or more.

A huge amount of money is generated for the government in the form of tax revenue. And whether the trucking company is large or small, the increased taxes are passed onto the consumer.

If you operate a small company or just own a diesel pickup truck, the effects of these taxes hurt. If you buy 40 gallons of diesel a week, you add more than $20 to the government’s coffers. The amount of money that the government makes each day from the sale of diesel alone is mind-boggling.

Does the government have a vested interest in sustaining this revenue-generating source? We are just talking diesel fuel sales in this article and not discussing gasoline sales. The taxes generated from fuel sales alone, each day, in the United States is larger than many yearly budgets for nations around the world.

Combined state, federal and local taxes on one gallon of diesel as of January (national average is 50.8 cents per gallon):

• Ohio: 52.4 cpg
• Michigan: 54.0 cpg
• Indiana: 64.7 cpg
• New York: 67.8 cpg
• Hawaii: 70.6 cpg
• Alaska: 24.4 cpg
• Georgia: 39.1 cpg

According to the United States energy information administration, we use more than 100 million gallons of diesel each day within the country. If we use the figure 50.8 cents of tax per gallon, that equals an amazing $18.6 billion per year just in diesel fuel sales. This does not include the tax on gasoline consumption. Some estimates indicate that actual diesel consumption is closer to 150 million gallons per day. Using anyone’s measure, the United States is collecting nearly $19 billion.

These numbers are staggering, but they pale in comparison to the revenue generated from gasoline taxes each year.

In 2010, the Environmental Protection Agency (EPA) will mandate that all diesel vehicles use ultra low sulpher content diesel (ULSD) fuel. We actually have been phasing in the new ULSD since 2006.

Without getting extremely technical, the new ULSD fuels have less lubricating properties than the older diesel fuels, which they replace.

This has required diesel manufacturers to completely redesign the fuel systems on their engines.  Of course, the new fuel systems cost more to produce, and the research and development costs must be calculated in as well.

Many foreign governments subsidize the research and development costs to their manufacturers. However, this is not the case in the free market here in the United States.

Another major factor in the cost of diesel is the increased costs in production necessary to achieve the low sulpher levels. A major change in the fuel delivery and transport infrastructure was also necessary — all of which has added to the cost of fuel.

Not only has the EPA required the use of ULSD fuels, it has also imposed greater exhaust emissions standards that must be incorporated into the new engines. Yet, this further adds to the cost. While the U.S. engine manufacturers absorb the costs, foreign manufacturers get help from their governments.

This double standard has prompted at least one U.S. engine manufacturer to stop building smaller diesel engines. The U.S. consumer, regrettably, loses because diesel engines are more cost-efficient than gasoline engines to operate.

The reasons that diesel fuel prices are so high today is a complex subject. A few years ago, diesel cost significantly less than gasoline.  Today, it is significantly higher to purchase. The answer to the question is our own government.

While the European car market is made up of a much higher percentage of diesel-powered vehicles than the U.S. market, we appear to be locked into gasoline engine technology.

We, the consumer, pay for this shortsightedness daily at the fuel pumps. It would be inappropriate to blame this on the manufacturers of engines. It is a direct result of government regulation and taxes.

Unless, and until, U.S. citizens demand accountability from within our governments energy- related agencies and require of them a legitimate long-term energy policy, we can expect more of the same. The government seems to be willing and able to demand accountability from our school systems, all the while unable or unwilling to demand the same of our so-called watchdog agencies. A thoughtful individual might ask where are all those fuel tax dollars going.

Until fuel sales are no longer a profit center for the U.S. and state governments and until we see a transparent accountability of the money collected, we can expect more of the same.

Until government agencies responsible for regulation and legislation are used to enhance legitimate energy strategies instead of being used by political parties to garner votes, we can expect more of the same.

There are about 18,000 full-time employees within the EPA. The 2009 projected budget for the EPA is $10.5 billion.

Cost to run the agency works out to be more than $583,000 per employee.

No wonder fuel prices are so high.

Nick Shultz is an instructor of Automotive Technologies at Owens Community College. He is an arbitrator for the Better Business Bureau who specializes in cases involving the Ohio and Michigan Lemon laws. He is a certified master automotive technician by ASE, General Motors and Ford Motor Co. Shultz, a Toledo native, will take questions from letters@toledofreepress.com.

This entry was posted on Friday, March 20th, 2009 at 12:00 am and is filed under Auto Sense, Wheels.
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