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Posted by David Sherman [72.47.9.228] on Wednesday, December 08, 2010 at 17:45:35 :
In Reply to: Current theories anybody--or facts?? posted by Bob in North GA [75.91.44.195] on Wednesday, December 08, 2010 at 07:26:29 :
In terms of cost of production, diesel should be cheaper. It's much simpler to make, though all the EPA regs might have counteracted that. I think what it comes down to is demand, though, and the price differential will average out to the difference in energy content when burned in the average engine. You get more BHP/gal from diesel than from gasoline, and you're willing to pay for that -- maybe not the entire difference in efficiency, but definitely a little bit more. If gasoline was cheaper in BHP/gal (or $/ton-mile) over an extended period of time, we'd see the big rigs switching back to gas engines.
I compare it to construction lumber. During the building boom a few years ago, OSB (waferboard) was actually more expensive per board foot than dimensional lumber. That made no sense because you need a lot bigger and higher-quality log to make a 2x12 than you do to make chips for OSB. However, every tract house being build was sheathed in 7/16 OSB, whereas aside from studs, they used very little dimensional lumber. You might ask why the mills made good logs into a low-value product and cheap logs into a high-value product, but logs aren't worth hauling very far, and there are a lot more regular sawmills than waferboard mills, so the loggers have to sell to the nearest mill. It's supply and demand for the end product, not the cost of making the product, that made waferboard more expensive than sawn lumber for a while, and I think it's similar with diesel versus gasoline.