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Diesel surpasses $4 nationwide

Feb. 28, 2012
  The bad news is that diesel fuel prices have surpassed $4/gal. nationally this week, rising 9 cents from a week ago to settle at $4.05/gal. There may be some good news, though, on the horizon.

The bad news is that diesel fuel prices have surpassed $4/gal. nationally this week, rising 9 cents from a week ago to settle at $4.05/gal. There may be some good news, though, on the horizon.

In looking at the futures market, where commodities are bought and sold months in advance, traders are holding steady with their prices, indicating that diesel prices will remain high, but not continue climbing. That, of course, is subject to change based on the current situation over Iran’s nuclear program, hurricane season which is quickly approaching, and any number of other unforeseen world crisis.

“It’s essentially following the crude path set by the world,” Neil Gamson, an analyst with U.S. Energy Information Administration (EIA), told Fleet Owner. “For every dollar increase in the price of a barrel of crude, it’s 2.4 cents increase in product.”

According to Gamson, a barrel of West Texas Intermediate crude was trading at just under $97/barrel on Feb. 6. Since then, it has risen to $108/barrel.

“That’s a $10, $11 increase,” Gamson points out. “[As a result], we’ve had about a 24-cent increase in price per gallon in the last few weeks.”

According to EIA, California truckers still face the highest price per gallon, $4.41. The cheapest diesel fuel appears in the Rocky Mountain and Midwest regions, where truckers are “only” paying $3.91/gal. The only other area of the country where the price is below $4/gal. is the Gulf Coast, where it’s $3.99.

Gamson noted that EIA’s next short-term energy report will be out March 6 and will provide more detail on the future path of diesel prices. In the recent past, though, he said a number of factors have played a role in the current run-up in prices.

“The world supply & demand situation is a little tight,” Gamson said. “The U.S. economy is growing, the Chinese economy is growing, and a few other areas are growing.

“There’s also the loss of crude oil in South Sudan, which is a new country but is an oil-producing country, but they have to ship their oil through North Sudan, but then the oil is trapped,” he added. “While it’s not a lot of oil, any [disruption] in a tight supply hurts.”

The current Iran situation is not helping either. As more and tighter sanctions are placed on Iran by the U.N., there is the increasing possibility that Israel could use military power to stop Iran’s nuclear ambitions.

Also, Gamson said, the situation with refineries, such as a Sunoco facility in Pennsylvania that may be shut down by this summer, could hurt future prices at the pump. That refinery, Gamson said, provides 160,000 barrels of oil to the Northeast each day.

“That could make [supply] tight in the Northeast,” Gamson said.

Also, Hess Co. has shuttered a facility in the U.S. Virgin Islands that was providing as much as 500,000 barrels a day to the Northeast.

About the Author

Brian Straight | Managing Editor

Brian joined Fleet Owner in May 2008 after spending nearly 14 years as sports editor and then managing editor of several daily newspapers.  He and his staff  won more than two dozen major writing and editing awards. Responsible for editing, editorial production functions and deadlines.

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