Fuel prices finally decline

After a 10 week run of increases, average diesel and gasoline pump prices in the U.S. finally took a dip this week, according to data tracked by the Energy Information Agency (EIA).

The average U.S. price for diesel dropped 4.9 cents to $4.086 per gallon, while the average price for gasoline dipped 5.2 cents down to $3.826 per gallon. However, EIA noted that this week’s diesel and gasoline pump prices remain 30 and 31.7 cents higher, respectively, per gallon compared to the same week in 2011.

The agency noted that a significant $4.26 drop in oil prices this week to $91.93 per barrel is part of the reason while fuel prices finally reversed their upward course. However, EIA expects oil prices to remain unstable in the face of many different economic and geopolitical pressures going forward.

“While historical volatility has declined sharply, implied volatility has fallen only slightly and more gradually on perceptions that geopolitical, technical, and economic risks to future market conditions are largely unchanged,” the agency noted in its most recent update about the global petroleum market.

“Uncertainty about Iran's nuclear ambitions and surprise production outages from outside of the Organization of the Petroleum Exporting Countries (OPEC) are sources of potential upside price risk, while a slowdown in China's economic growth and fears over the stability of the Euro – even with the recent government and central bank interventions – posing potential downside risks to future crude oil prices,” it said. “As a result, the market's expectation about future crude oil price volatility has remained relatively high despite the recent downward trend in historical volatility.” 

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