Farm fuel prices seem to fluctuate by the day, which can make writing a budget for your agricultural operations difficult. The prices of gasoline, diesel, and propane are related to the cost of crude oil, which can be affected by events on the other side of the world. Here's a closer look at the factors that can impact the cost of the fuels your farm relies on.

What Affects Farm Fuel Costs?

1. Crude Oil Prices

The price of crude oil represents nearly half of the retail price of gasoline, which is one reason fuel costs can be so volatile. Most of the global oil market is regulated by the Organization of the Petroleum Exporting Countries (OPEC). The 14 members of OPEC work together to regulate the global supply of oil by giving each country production quotas.

Because the supply is relatively constant, the price of oil can go up dramatically when the demand increases. More people driving cars, using oil to heat their homes, or starting farms in other countries makes crude oil more valuable, which is why you might see the price jump over the course of a few months.

2. Taxes & Inflation

The prices of most goods tend to rise over time, a phenomenon known as inflation. While gas and propane prices may seem much higher than they were 10 or 20 years ago, they’ve actually grown at a slower rate than the economy in general. 

Oil products are subject to a variety of federal, state, and local taxes, translating to higher consumer prices. When combined, these levies make up about 18% of the price of gasoline and over 20% of the cost of diesel in some areas.

3. Refining Costs & Profits

Crude oil refineries process crude oil into the farm fuels that heat your buildings and power your equipment. This is a difficult, lengthy process, so the costs will be higher for products that require more refinement. 

Diesel and heating oil are heavier than gas and propane, so the prices tend to be lower. In addition to covering their operating costs, oil companies charge a markup that goes toward their profits.

4. Transportation Costs

The difficulty of moving crude oil to a refinery and delivering products to customers can also affect farm fuel prices in a certain market. Areas near refineries or served by oil pipelines will typically enjoy lower prices than others without easy access. If oil companies have to deliver all their products by truck, your farm fuel prices will likely reflect the added cost.

As a family-owned business, Main Energy in Palmyra, NY, understands the importance of keeping your costs down. They proudly offer affordable contracts, reliable deliveries, and some of the best prices to farmers throughout Upstate New York. Visit their website to learn more about their farm fuel delivery services, or call (315) 597-5200 to request a quote today.