Diesel prices are set to stay “solid” in the coming weeks because of recent increases in crude oil prices, according to an Energy Information Administration (EIA) analyst. This comes in spite of the national average for a gallon of diesel seeing a 3.6-cent price break for the week ending Jan. 15.
All regions posted a decline in prices, with the exception of California, where it increased 0.2 cents to $2.603. The largest decline in diesel prices was found in the Lower Atlantic region as prices fell 4.9 cents to $2.424. The New England region retained the dubious honor for being the most expensive region in which to fill up, despite a 1.3-cent decline to $2.663. The Midwest meanwhile dethroned the Rocky Mountain region for the cheapest, at $2.408 on a 4.3-cent drop.
Crude oil prices approached $67 per barrel today as traders grew jittery on geopolitical events—namely an Iranian threat to cut oil exports and supply instability in Nigeria. From December until this past week crude oil price hovered in the range of the high $50s to low $60s.
If crude oil prices remain at the high $60 level eventually retail diesel and gasoline prices will absorb the premium. It typically takes a couple of weeks or longer for spot crude oil prices to pass through to the retail level.
As reflected in last week’s decline in diesel prices, generally mild winter weather in the U.S. freed up energy supplies to drive prices south 3.6 cents.
“The biggest driver of the [petroleum] markets has lately been crude oil prices,” Michael Burdette, senior analyst for EIA told FleetOwner. “Once prices came down from hurricane-induced levels, it took a long time for diesel prices to fall because of the heating oil season. Now that we’ve had mild weather, we haven’t had much influence from winter weather. Last week’s diesel price drop really reflects the pass-through from earlier declines in the spots and futures markets.”
Geopolitical threats aside, a mild weather so far is allowing the energy industry to build up stocks of distillate—a petroleum product which diesel and heating oil is derived from—at a time of year when stocks usually slim down.
“The big question is when are we going to really see severe winter weather?” Burdette said.
For more detailed diesel price information, go to www.fleetowner.com/diesel.xls.