Diesel Average Drops 3.2¢ to $2.782 for Eighth Straight Weekly Decline
The eight-week stretch is the longest period of consecutive declines this year and the longest streak since the 12 weeks ended Feb. 2. The combined decline totals 13.2 cents a gallon over eight weeks since fuel cost $2.914 on May 25.
Trucking’s main fuel is now $1.087 cheaper than last year.
Coincidentally, the national average price for gasoline also fell by 3.2 cents a gallon, leaving it at $2.802, or 2 cents higher than diesel for the second week in a row. Gas generally has been increasing in price since its Jan. 26 low of $2.044 but is still 79.1 cents cheaper than a year ago.
“Diesel’s going down following crude oil prices,” said Hannah Breul, an analyst at DOE’s Energy Information Administration. “Crude oil prices are the primary determinant of what gasoline and diesel prices will be. Their prices have dropped pretty precipitously in the wake of the announcement about the sanctions removal in Iran.”
Kirk Welch, safety and compliance manager for Toyota Transport in Torrance, California, said the very high gas prices in his region should not affect trucking companies burning diesel, though it will make things harder for employees who use gasoline-powered vehicles in their personal time.
“We passed stations the other day, and regular gas is really spiking up and diesel seems to be staying consistent,” Welch said. “Obviously, if our diesel is staying consistent, it’s not impacting our trucking company. [However,] my personal vehicle — having to fuel it sucks. It seemed like a week, a week-and-a-half ago, [gasoline] just jumped like about 30 or 40 cents.”
Diesel prices in California dropped 2.2 cents to $3.111 on July 20. With the exception of July 6, when the price of diesel rose by 0.1 cent, fuel prices have been trending down since May 25 when the state average was $3.269.
Gasoline prices in California rose again last week, but at a far less torrid pace. California gas climbed by 1.7 cents a gallon for the week ended July 20, compared with 44.8 cents the week before.
EIA’s Breul said West Coast diesel is in good supply, unlike gasoline, meaning fuel prices are stable. California’s high gas prices are the result of an in-state refinery outage in Torrance that occurred in February. Breul said that after the first five weeks following the outage, the Golden State was forced to import gasoline to maintain a sufficient amount of fuel.
“That’s going to be a prolonged outage there, and there is going to be more pressure on prices in that region,” Breul said. “When you have a refinery outage like that that removes a bunch of supplies, the market has to reset and find that elsewhere because that market is so geographically isolated. . . . It requires the barrels to come from much further away, and they are further complicated by the product specifications there.”
Until the Torrance refinery is again producing barrels of gasoline at pre-explosion levels, Breul said, prices in California are going to be elevated.
“In April, there were a couple of additional refinery outages, and that put a temporary uptick in prices, and then most recently, there’s been transfer reports of delayed products arriving,” she said. “One week there was zero, [but] the last week, it was like 7,000 barrels a day, which is just not enough to offset what’s not coming out of Torrance.”
EIA reported July 22 that U.S. crude oil refinery inputs for the week ending July 17 averaged about 16.9 million barrels a day, or 45,000 barrels more per day than the previous week. Refineries were very busy, operating at 95.5% of operable capacity.
Crude oil slid below $50 a barrel on the New York Mercantile Exchange for the first time in more than three months on speculation that Iranian shipments will climb. It closed July 22 at $49.19.
Bloomberg News reported that the United States agreed to end efforts to limit Iran’s oil sales as part of the nuclear agreement Iran and six world powers reached in Vienna last week. Iranian Oil Minister Bijan Namdar Zanganeh said the country will focus on regaining oil sales it lost because of sanctions regardless of the effect on prices.
Breul estimated that diesel will continue to decline until the fourth quarter of the year, when demand and prices typically go up. EIA projects that the average national price for diesel in 2016 will be $3.03 a gallon, up from this year’s estimated average of $2.86 but significantly lower than the 2014 average of $3.83.
In comparison, EIA’s projections for the national average of gasoline are $2.48 for this year and $2.55 for 2016.
