Which States Tend To Have The Cheapest Diesel (And Is There A Reason Why)?

Even as the scientific world seeks out new kinds of fuel, including some strange renewable energy sources, fossil fuels continue to keep modern society afloat. Not only is gasoline vital for everyday travel, powering appliances like generators and lawn mowers, but diesel is hugely important as well. It too is used for transportation, as well as running heavy machinery and powering generators around the world. While it can be expensive to fuel up in the United States, a handful of states keep their rates lower than most.

Though it's typical for diesel to cost more than gasoline, across the U.S., diesel prices are far from uniform. A few states stand out as those with the consistently lowest price per gallon over time. Oklahoma has proven to be one of the states with the lowest diesel costs, ranging from around $3.06 to $3.40 over the past year. Texas has fluctuated between $3.24 and $3.46, while Mississippi has stayed in the $3.22 to $3.54 range. Other low-cost diesel states tend to be Missouri, Montana, Wisconsin, Louisiana, Iowa, Arkansas, and Tennessee. These states sitting at these price points for diesel isn't random, but rather a result of various factors that are different from state to state.

A lot can go into the pricing of diesel fuel. These are some of the major factors that have led these specific states to have the lowest pump prices in the U.S. 

There are a few factors that influence the cost of diesel across the board. The most important of these is the cost of crude oil. From 2004 to 2023, it accounted for roughly 50% of the average cost of diesel at the pump. As with any product, supply and demand is a motivator in price fluctuations, which segues perfectly into the more region-specific pricing elements.

It has been observed that there's a seasonal aspect to diesel demand. As a heating agent, it's typical for diesel demand to increase in the winter and dip in the summer. Therefore, states that have shorter, less extreme winters, aren't as likely to hike up diesel costs during colder months. Also, there's the matter of operating costs for businesses and state taxes. Higher operating costs and higher taxes will lead to increased diesel rates. The proximity to oil refineries can't be ignored either, as them being within the state means transportation and other distribution costs are greatly diminished. Texas is home to half of the 10 largest oil refineries in the U.S., and Oklahoma is close to crude oil production sites, hence the cheaper rates.

Meanwhile, other states aren't so fortunate. As a result, they have the highest diesel costs of any areas in the U.S.

Knowing what we do about why diesel is so cheap in specific areas in the United States, we're able to take a look at those with much higher rates and understand the reasons for them asking so much. At the time of publication, Hawaii is the most expensive state in the U.S. to buy diesel. Despite having one crude oil refinery, the state doesn't produce oil or contain any reserves. This, coupled with the fact that it's an island chain that needs to have diesel and gasoline imported from the mainland, raises costs. Hawaii's electricity generators also require large amounts of oil, further driving up demand and therefore cost.

Meanwhile, the situation in California — the state with the second most expensive diesel – is a bit different. Common market factors aside, the state is almost entirely self-sufficient in its fuel refining, with imported fuel only accounting for between 3% and 7% of its entire supply. Higher tax rates on diesel fuel have contributed tremendously, and to a much lesser extent, so has the Low Carbon Fuel Standard — a policy regarding commercial emissions and reducing them with the implementation of low-carbon fuel sources. Biodiesel, is one such example of this type of energy source. LCFS regulations only account for between $0.08 and $0.10 per gallon, so not too much, but still a noteworthy amount.

Evidently, a lot can impact the cost you pay at the pump when filling up on diesel. One can only hope that wherever you may be, diesel prices will improve down the line or remain at a relatively affordable cost.