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In business, one of the great factors to work by is when there is price stability or at least predictability. Today, even a semblance of stability may be the first thing that is thrown out of the window as crisis upon crisis hits. In most business planning, a good part of the yearly budget allocation goes to the powering up of machineries and to vehicles for the distribution of goods and materials. As diesel fuel prices fluctuate heavily, business predictability suffers, margins are lost and for medium to small businesses the existence could sometimes be a struggle to stay afloat.

Diesel fuel like any commodity is market driven; it is subjected to the mechanics of supply and demand.

Factors influencing supply and costs
Several factors are attributable to this but the common factor is that as intense pressure is demanded on its supply, the result is a spike in prices. This had been going on for the past several years due to the emergence of developing countries and the continued dependency on oil of the developed ones.

Another factor is the practice of the Oil Producing Countries (OPEC) in setting upper production limits on its members. OPEC members produce 40% of the worlds’ crude and its reserves are estimated to hold 66% of total world reserves. Prices are also heavily affected by trade disruptions and wars. This is more so when it affects productivity like the present war on Iraq. Major price fluctuations also happened during the 1980 Iran-Iraq War and the Oil Embargo in 1973.

One of the greater causes is that few alternative sources of energy are available. If an alternative source of energy is available, the demand for oil will decline rapidly and the product supply and demand will become more balanced. This could result in the rapid decline of crude prices. Sadly though that even until this time, when other resources are actually available and should have been tapped and supported, nothing much had been happening. Solar energy for example has been there and is a great source, its technology has been around since 1950 but it has not gained as much patronage and political will to develop and implement as it should have received.

Due to the continued dependency on oil and its derivatives, refining capacity has been getting tight. While the oil dependence of the vehicle fleet and industry of the United States has been a known value since oil was discovered in the 1930’s and has always had a healthy supply of this commodity, the accelerating growth of industries in China that has been growing industrially only for the last 20 years (thereby accelerating the demand), and the growing requirements of other countries like India and Russia have placed a strain on its production.

Taxes. After the combined cost of the raw crude, refining and distribution, taxes are levied. The tax then gets a boost (even if only in increments) every time there is an increase in crude oil refining.

The recent price fluctuations in oil and its byproducts have once again placed a focus on the tapping of additional and alternate sources of energy. This time may it play out well as even when other oil wells could be tapped, even these could eventually tap out.

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