Long-Term Outlook for Crude Oil
Prices are projected to continue to rise gradually in the Reference case (Figure 4), as the world economy recovers and global demand grows more rapidly than liquids supplies from producers outside the Organization of the Petroleum Exporting Countries (OPEC).

Factors Affecting Diesel Prices
The retail price of a gallon of diesel fuel reflects the underlying costs and profits (or losses) of producing and delivering the product to customers. The price of diesel at the pump reflects the costs and profits of the entire production and distribution chain, including: •The cost of crude oil to refineries •Refining costs and profits •Distribution and marketing costs and profits and retail station operation Taxes The relative share of these components to the retail price varies over time and among regions of the country.

The price at the pump also includes Federal, State, and local taxes. At the end of 2010, Federal excise taxes were 24.4 cents per gallon, and State excise taxes averaged about 23 cents per gallon. Some States, counties, and city governments levy additional taxes.
The retail price also reflects local market conditions and factors such as the location and the marketing strategy of the owner. Some retail outlets are owned and operated by refiners, while others are independent businesses that purchase diesel fuel on the wholesale market for resale to the public.
Crude oil prices are determined by worldwide supply and demand. On the demand side of the equation, world economic growth is the biggest factor. One of the major factors on the supply side is the Organization of the Petroleum Exporting Countries (OPEC) which can sometimes exert significant influence on prices by setting an upper production limit on its members, which produce about 40% of the world's crude oil. OPEC countries have essentially all of the world's spare oil production capacity, and possess about two-thirds of the world's estimated crude oil reserves. Oil prices have often spiked in response to disruptions in the international and domestic supply of crude oil.

International Diesel Fuel Demand Can Affect U.S. Prices
Many other countries rely even more heavily on distillate fuels, specifically diesel fuel, than the United States does. This is the case in Europe, where demand for diesel has grown rapidly as cars and light-duty trucks have been moving from gasoline to diesel fuel. Diesel-fueled vehicles now represent over half of new car and light-duty truck sales in that region of the world. Europe uses about a quarter of the world’s distillate (heating oil and diesel), so it represents a significant factor in the high growth of world distillate demand. As in the United States, heavy-duty vehicle use of diesel fuel worldwide has been adding to world distillate demand growth as economies have been expanding. And use of diesel for growing electric power generation in many parts of the world such as China and South America also is contributing to demand growth. U.S. diesel fuel prices are increasingly affected not just by U.S. distillate demand growth, but by the growth in competing international demand for distillate products.

Transportation Costs Affect Prices
Transportation costs generally increase with distance between the retail location and distribution terminals and refineries. Areas farthest from the Gulf Coast (the source of nearly half of the diesel fuel produced in the United States) tend to have higher prices.

Source: U.S Energy Information Administration

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