Diesel, oil prices continue record-setting trend

Skyrocketing oil prices drive diesel fuel prices to new heights

By Dave Hannon -- Purchasing, 3/10/2008 2:19:00 PM

Diesel prices spiked 16¢/gallon this week, according to the Energy Information Administration. The average cost of one gallon of on-highway retail diesel fuel is $3.82, more than a $1.13 higher than it was a year ago.

Regionally, the central Atlantic states had the highest diesel prices on average at $3.99. 

The runup in diesel prices comes as oil prices continue to hit prices of more than $105/barrel, which many economists blame on the decreasing value of the U.S. dollar.

While the correlation between the value of the dollar and oil prices is not easily explained, a recent story in U.S. News & World Report tried to explain it by interviewing Kristin Forbes, a professor at MIT's Sloan School of Management and former member of the White House's Council of Economic Advisers.

As Forbes explains, because oil is priced in dollars on the world market, as the value of the dollar weakens, foreign currencies gain strength and other countries can buy more oil for the same amount of money. Or, more often, they buy more oil, which increases the demand for oil and, thus, the global price.

“So in the United States it looks like the price is going up sharply, in dollars, while in other countries it's actually going up by much less or staying about the same,” Forbes says.

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