Diesel Average Slips for Seventh Week to Lowest Level Since Mid-November

This story appears in the Aug. 25 print edition of Transport Topics.

The U.S. diesel average dipped 0.8 cent to $3.835 a gallon, its lowest level since mid-November, the Department of Energy reported.

The average has declined a total of 8.5 cents a gallon since June 30, leaving commercial trucking’s main fuel at its low point since Nov. 18, when it is $3.822, DOE said after its Aug. 18 survey of fueling stations.

A year ago, the diesel average was $3.90. The peak price for fuel over the past 12 months was $4.021 on March 10. Prices have declined in 19 of 23 weeks since then.

Meanwhile, the retail gasoline average also dropped for a seventh straight week, said DOE’s Energy Information Administration. It hit $3.472 a gallon on Aug. 18, or 3.3 cents less than the previous week. A year ago the gas average was $3.55.

The current gas price is about average relative to the 12-month range, including a high of $3.713 in April and a low of $3.194 in November.

“Every Thursday we get a bulk load [of about 7,800 gallons of diesel]. I noticed a drop of 8 cents in just one week. That’s very significant,” said Clint Beckmann, who runs sales and operations for his family’s Beckmann Distribution Services in Carlyle, Illinois.

The company’s 45 power units distribute food in refrigerated and dry van trailers.

Analysts cited political and economic factors for the steady price declines of crude oil in both New York and London.

In politics, while feuding continues in the Middle East, the danger is not near oil-production sites. Therefore, the prices that rose in late spring are coming down in late summer.

“In Iraq, violence pushed the price for Brent crude higher, but the fighting has been in the north while the crude-oil sites are in the south of Iraq, so oil production is not seen to be endangered,” said EIA analyst Timothy Hess. Further, a glut of oil in the Atlantic basin has shielded prices against the turmoil.

Another source for crude has increased through Libya, Hess said. The North African nation is still highly unstable politically, but oil sales from there are rising.

Crude oil futures on the New York Mercantile Exchange generally traded between $94 and $97 a barrel last week before closing at $93.96 on Aug. 21. The highest close on Nymex this year was $107.26 on June 20.

Brent, used to value more than half the world’s oil, has plunged even more sharply, closing at $102.63 on Aug. 21, down from a 2014 peak of $115.06 on June 19.

Brent oil futures are traded in London in U.S. dollars. The North Sea oil is important to the United States because it is often shipped to East Coast refineries.

“A lot of Brent gets used in the U.S.,” said Denton Cinquegrana, chief oil analyst for the Oil Price Information Service. Although railroad shipping of North Dakota crude has been increasing, trans-Atlantic supply from the North Sea or Nigeria still feeds many East Coast refineries.

“Prices have fallen a great deal recently because news from the Middle East and Russia-Ukraine has been rather subdued,” Tom Finlon, director of the Energy Analytics Group in Jupiter, Florida, told Bloomberg News.

“Those situations remain very volatile. A flare-up of tension could send us right back to the highs,” he said.

The critical economic factor is the modest global pace of economic growth. While the United States enjoyed a 4% per year surge in gross domestic product during the second quarter, many other nations are not doing as well.

“The euro zone is down economically, and it’s not just the usual suspects, like Greece; it’s Germany,” Cinquegrana said.

He said there is still some room for oil prices to decline, perhaps to about $89 for Nymex crude and to $99 for Brent.

For refined products that would mean about $3.75 a gallon for diesel, Cinquegrana said.