Diesel Dips 0.8¢ to $3.871; Gasoline Falls for 3rd Week

This story appears in the Dec. 23 & 30 print edition of Transport Topics.

Diesel dipped less than a penny for a second week, declining 0.8 cent to a national average of $3.871 a gallon, and gasoline fell 3 cents to $3.239, its third straight drop, the Department of Energy reported Dec. 16.

Gas has declined 5.4 cents over those three downturns, and last week’s price was near the 2013 low of $3.194 set in mid-November, which had been its lowest since February 2011.

Diesel is 7.4 cents below the corresponding week of last year, while gas is 1.5 cents under its year-ago level, DOE said after its weekly survey of filling stations.

One fuel analyst said last week that, despite steady oil prices, continued high diesel exports were helping to prop prices up.

“Crude is steady or coming down, but diesel prices are not dropping,” said Roger McKnight, senior petroleum analyst with En-Pro International in Oshawa, Ontario. “I’m a bit concerned about how much is being exported.

“The only ones benefiting from lower crude prices are Gulf Coast refiners, in exporting it to Latin America and Europe,” McKnight told Transport Topics. “It’s got a lot of people scratching their heads.”

U.S. distillate exports, which include diesel, have jumped to the highest level in at least five years, reaching almost 1.4 million bbd as of early December, according to Energy Information Administration figures.

That’s up from an average of about 1 million bbd in the past two years and at 820,000 bbd in May, a two-year low. Combined exports of gasoline, diesel and other fuels reached a 2013 high of 3.79 million bbd in July, according to EIA, which is part of DOE.

Diesel’s only price increases since Labor Day were two gains totaling 6 cents around Thanksgiving, but the price is only 11 cents below its level of early September, and gas has dropped 37 cents since then.

Regionally, diesel slipped 1.8 cents in the Midwest region to $3.852, matching the Rocky Mountain region as the lowest of DOE’s five national regions.

But the price held above $4 in the subregions of New England and California, with each just over $4.06 a gallon, the highest among all national prices.

One large Canada-based truckload carrier said last week that it takes a variety of measures to curb its fuel expenses.

“We require company drivers to fuel at company-directed fuel stops, with no excess idling, and to use the cab heater as specified,” said Bryan Burningham, executive director of fleet services for Challenger Group.

The carrier also uses satellite-tracking technology to monitor fuel economy and to locate trucks close to their next load, helping to reduce empty miles traveled. It also uses single-wide tires and side skirts on some trailers, and in Canada, uses long combination vehicles, or LCVs.

With about 1,500 trucks and 3,300 trailers, Cambridge, Ontario-based Challenger, which has U.S. and Canadian operations, ranks No. 76 on the Transport Topics Top 100 listing of for-hire carriers.

Meanwhile, DOE said in a separate report last week that U.S. crude oil production will climb to a near-record level by 2016, as output from shale reserves continues to increase.

Domestic output will grow by about 800,000 bbd annually to 9.5 million in 2016, which is close to the record-high 9.6 million bbd set in 1970, EIA said in its Annual Energy Outlook for 2014.

Natural-gas production will jump 56% to 37.6 trillion cubic feet by 2040, boosting liquefied natural gas exports to 3.5 trillion, the report said.

And more crude could be produced in North America if Mexico goes through with a plan to dismantle its state-owned Pemex oil monopoly, Bloomberg News reported.

Mexico’s Congress approved a bill Dec. 12 that would end the monopoly, under which oil companies would be offered production-sharing contracts, or licenses for crude reserves ownership.

President Enrique Peña Nieto is seeking to end the monopoly, Bloomberg reported, but before becoming law, the proposal must be ratified by state assemblies, most of which are controlled by reform proponents.

According to a Citigroup estimate, such a move could double the country’s output and boost the world’s oil supply by 2.5 million bbd — the equivalent of OPEC member Nigeria’s production.

Oil prices held near $97 on the New York Mercantile Exchange last week, with crude futures closing at $98.77 a barrel, a two-month high, on Dec. 19, Bloomberg reported.

Globally traded Brent crude oil prices, which generally run higher, finished Dec. 19 trading at $110.29 a barrel, down about $2 from early December.

U.S. crude supplies declined about 3 million barrels in the second week of December, while distillates dropped by about 2 million barrels, EIA said in its weekly inventory report released Dec. 18.

The crude decline matched analysts’ estimates, while distillates were forecast to rise by 200,000 barrels, Bloomberg reported. Gasoline supplies rose 1.3 million barrels, slightly below forecasts.