Diesel and gas to hover near $2.62

Diesel and gas to hover near $2.62

Diesel and gasoline will both average $2.62 per gallon during the summer driving season (April through September), barring any major supply disruptions, the Energy Information Administration (EIA) predicted today

Diesel and gasoline will both average $2.62 per gallon during the summer driving season (April through September), barring any major supply disruptions, the Energy Information Administration (EIA) predicted today. Prices for both fuels are expected to increase as refiners change specifications, with diesel having to meet an ultra low sulfur (ULSD) spec and gasoline having to phase out MTBE additives.

On the diesel side, $2.62 would reflect a 21-cent premium over the same period last year. For gasoline, that price would equal a 25-cent increase.

Neil Gamson, EIA economist told FleetOwner that although recent diesel prices are now slightly higher than $2.62, price trends should follow a “channeling” pattern over the next six months, rising and falling around that price point.

“Crude oil prices have been sticking upward for the last couple of weeks,” Gamson said. “If that calms down we’ll see diesel prices coming down, but not a lot. [Crude oil prices are] down a little bit today.”

However, not all energy analysts share the $2.62 diesel prediction. Last week FleetOwner spoke with an economist with the Oil Price Information Service who predicted that diesel will approach $3 and maybe even surpass it during price spikes. EIA’s Gamson concurred this would be possible if there were significant supply disruptions.

See Diesel prices to heat up this summer.

EIA said the added cost to produce and distribute ULSD will be from four to six cents per gallon. However, the bigger mover of diesel prices will likely be distribution problems, which could cause spot prices to spike. EIA has declined to single out any specific spot market as being more vulnerable to shortages, saying, “there is no one region that is more or less likely to experience problems.”

Last month a ConocoPhillips executive identified “at-risk” markets to be the Northeast region, Chicago, the Mountain states as well as Atlanta, GA, Memphis, TN, and Nashville, TN. A YRC Worldwide executive anticipated that some spot markets could see a 10- to 20-cent per gallon premium as a result of shortages of on-spec ULSD.

Gasoline will have a similar transition as it will see consumption increase 1.5% compared to summer 2005 while MTBE gets phased out. DOE expects diesel demand to expand 3.2% over summer 2005, a slight dip from the 3.5% average annual growth rate over the past 15 years. Increased demand coupled with the phase-out of MTBE in gasoline will contribute to the $2.62 price point, EIA said.

Unlike ULSD, the phase-out won’t likely cause distribution problems, although foreign exporters may be slower to respond to supply disruptions.

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