It’s excellent news for consumers, but bad news for refiners. The national average for a gallon of diesel has dropped for the fifth straight week, according to the U.S. Dept. of Energy, by 3.2 cents to $1.348.
And the price, according to Tom Kloza of the Oil Price Information Service (OPIS), could go down even more, despite the fact that several refiners are scheduling midsummer maintenance or reducing crude runs.
“There are an awful lot of advisors and analysts that are bearish about oil right now, whether it is crude, diesel or heating oil,” Kloza told Fleet Owner. “There are no groundswells like last year. Even though the temperature is 100 degrees outside people don’t have the sentiment to buy heating oil yet this year.”
Kloza said prices are down because oil levels are high, unlike last fall, when President Clinton released 30-million barrels of oil from the Strategic Petroleum Reserve (SPR) to avoid potential shortages. Now refiners are hoping OPEC will curtail its production so the price per barrel, down about $5 compared to this time last year, won’t be reduced further, which in turn would lower the value of their own output.
OPEC secretary general Alí Rodríguez-Araque said yesterday that he was consulting all OPEC ministers over the possibility of holding an extraordinary meeting of OPEC in early August, which could eventually decide on a production cut. If a meeting isn’t held then, the next scheduled date to discuss production cuts would be August 18.
“There are many uncertainties in the market right now, including the present world economic performance, as well as supply and demand projections,” Rodríguez-Araque said. “OPEC is taking a much more proactive role in monitoring market developments and we feel there might be a need to meet ahead of our ordinary meeting, scheduled for late September.”
The OPEC Secretary General pointed out that several ministers agreed with the need for an output cut, although as yet there were no specific figures.
Kloza said the smart money is on the oil market being weak for a couple or months, even if OPEC scales back production.
“The economic downside is showing,” Kloza said. “If you ask most analysts if oil prices will be flat or higher over the next 60 to 90 days, they’ll tell you it will be flat to lower.”
But that again is good news for carriers. The price for a gallon of diesel at the pump in California, where it was $1.605 just two weeks ago, was $1.515 as of July 23. That average is the highest in the country, but is now the only one of nine U.S. regions to be over the $1.50 mark.
Five of the U.S regions – East Coast, Lower Atlantic, Midwest, Gulf Coast and Rocky Mountain – are all reporting average prices to be in the $1.30s. The Lower Atlantic, at $1.309, is reporting the lowest average prices.