As high prices at the pumps and the rise of biofuels cut into demand for gasoline, US oil refiners are switching their attention to diesel.

“The trend that is important behind the story of the future expansions is the downtrend in gasoline,” said Joanne Shore, analyst for the U.S. Energy Information Administration, speaking to Thomson Reuters.

“We feel that demand for distillates is going to be higher than gasoline for the next several years. And margins right now for distillates are quite a bit higher than gasoline, so it makes more sense to do your investments there than other projects,” Valero Energy Corp spokesman Bill Day said, in the same article.

Demand for diesel is increasing globally, with China and Europe playing a major part in driving prices up. This from Bloomberg:

China is pushing the price of diesel fuel higher by stockpiling it ahead of both the Summer Olympics and the need to rebuild Sichuan province after last week’s earthquake … The country is hoarding the fuel in the event that its power grid fails and it needs to use backup generators.

Low inventories in Europe are also pressuring diesel prices, which have risen 53 percent in the last year in the US, compared with a 20-percent increase in gasoline.

Tom Dyson in Daily Wealth says, “I’m trying to figure out if ethanol’s a good investment. Frankly, I haven’t made up my mind yet. The fortunes of the ethanol industry depend on the government. Without the government’s support, the ethanol industry wouldn’t exist in America. So to invest in ethanol, you have to know what the government’s going to do.

“John McCain hates ethanol. If he wins the election, he’ll remove all the ethanol subsidies and hurt the farm economy. If the Democrats win, they’ll keep the subsidies in place, and ethanol stocks will probably take off.”