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Diesel Prices Set to Fall

Diesel Prices Set to Fall

diesel price forecast set to fall

Today the Energy Information Administration (EIA) published its short-term energy outlook, which forecasted the average price for a barrel of crude oil to be just over $51 per barrel. In the past two weeks diesel prices are finally starting to fall from record-setting levels, but now winter— with its seasonally expensive pump prices— is now upon us.

EIA economist Neil Gamson told Fleet Owner that the recent falloff in prices is related to the reduction in crude prices. “[Crude] has gone down $7 from its peak to $49 per barrel, which is still high by historical standards,” he said.

The declining crude prices, which occurred about three weeks ago, have finally been passed through from the wholesale to the retail level, noted EIA economist Jacob Bournazian.

“We can expect another 10-cent decline in the next two to three weeks,” Bornazian said. “That remaining level gets passed through more cautiously at a retail level, [as prices are] dropping as competition drives them down. By Thanksgiving we should see [diesel prices] at the low two dollar level.”

The major assumption in predicting prices through November and early December is that crude prices will stabilize due to an unusually strong growth in crude stocks. This buildup in stocks will make crude prices more resilient to major supply disruptions, Bournazian explained.

Traditionally, the winter demand for distillates— which could be used for either heating fuel or big rigs— is high because the cold weather diverts stocks to the former while trucks continue to roll. Distillate stocks are currently below the average level, Gamson noted, which would make inclement weather the biggest wild card to an otherwise-improving short-term diesel forecast.

“If there turns out to be a normal winter, once we start getting high demand for distillate fuel on the heating end, that could put some pressure on the diesel prices,” Gamson said.

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