After weeks of rocketing diesel prices, supply conditions both nationally and in the white-hot West Coast region are set to stabilize to more gradual increases, according to the Energy Information Administration (EIA).
The national average price for a gallon of retail diesel rose five cents to $2.168 last week, which is just over half the 9.8-cent spike posted the previous week.
All regions posted an increase, with the oil-rich Gulf Coast posting the largest hike, up 6.5 cents to $2.10. The region retained its crown for the least-expensive pump prices, despite the relatively large jump. There is good news for the West Coast region, as it posted among the smallest increase at 3.8 cents to $2.45.
“Additional supplies are coming back to that region, especially imports,” Jacob Bournazian, EIA economist told Fleet Owner, noting that the area had lean stocks since the beginning of February. “With transit time from Asia being about 24 days, supplies are arriving that will continue to stabilize the situation. Additionally, [diesel] demand is going to be falling off in the coming weeks. You couldn’t ask for greater resolution for the situation.”
Last week Washington state diesel prices remained flat after soaring 30 cents the previous week. Washington remains the most expensive state in which to fill up in America, with some pumps reporting prices above $2.60.
Refinery outages in the region coupled with a new diesel lubricity standard implemented in Washington in the beginning of February were responsible for steep increases in the West Coast.
Nationally, diesel prices are set to rise at a more moderate level.
“Diesel prices may go up another 4 cents over three weeks, and will probably crest out at the $2.20,” Bournazian said. “However, that’s assuming crude doesn’t go much higher—the only thing that will drive diesel up even higher is if crude somehow gets pushed over $60/barrel.”
EIA has projected that through the remainder of 2005 diesel prices will hover just above the $2 level.
Separately, EIA has upwardly revised its average crude price forecast for the first quarter of 2005 to be about $48.70 per barrel. This marks a $2 increase over EIA projection for last month, and a whopping $13 above the first quarter last year.
A rise in world petroleum demand will keep crude prices high. Demand is expected to edge up 2.5% this year, a rate that would outstrip growth in global refinery capacity. Although this is considered to be strong growth, it is less than 2004’s 3.4% surge in petroleum demand.