US Diesel Average Slides to $2.51; Lowest Level Since July 2009
The U.S. average retail diesel price dropped 4.7 cents a gallon last week to $2.514, the Department of Energy said, marking a 14th straight week of declines.
The diesel average has shed a combined 40 cents, or 13.7%, since Memorial Day, when the price reading was $2.914. A year ago, diesel cost $3.814 a gallon. The last time it was lower than the present was in July 2009.
DOE’s Energy Information Administration also said Aug. 31 after its weekly survey the retail gasoline average plunged 12.7 cents a gallon to $2.51, just the second consecutive weekly decline. A year ago, gas cost $3.459.
The year-ago prices for diesel and gasoline are both 12-month highs.
The diesel streak soon could come to an end, though, as crude oil prices have been rising. Oil hit a 12-month low Aug. 24, closing at $38.24 a barrel on the New York Mercantile Exchange. It shot up to $49.20 on Aug. 31 before closing at $46.75 on Sept. 3.
“Oil prices are very reflective of what makes it through to the retail level,” EIA analyst Mason Hamilton said. Beyond the critical oil market, Hamilton said diesel prices actually have been benefiting from the gasoline market.
Refineries are making good profits on gasoline now, Hamilton said. However, the plants cannot turn barrels of oil into 100% gasoline. Some of it must become diesel fuel, so U.S. diesel stocks are soaring as a byproduct of the gasoline market.
Greg Garen, vice president of FTC Transportation in Oklahoma City, said he checks fuel prices daily, so he has been following the diesel decline carefully.
“It’s definitely been a savings, but the other side of the coin is that our fuel surcharges from brokers are also dropping,” said Garen, whose company runs 35 highway trucks for pulling dry and refrigerated vans, mainly for Feed the Children charity.
On a net basis, he said, lower diesel costs have outstripped the fuel surcharges, but the main beneficiary of that has been driver recruitment.
“Shippers expect their rates to drop as well, but we’ve told them that driver retention is critical,” Garen said, adding that most of the fuel savings has been passed along as driver pay.
A separate EIA report said that during the week ended Aug. 28 the national supply of ultra-low-sulfur distillate fuels, mainly diesel, stood at 129.3 million barrels, up from 105.7 million a year ago.
“For this time of year, it’s definitely above normal,” Hamilton said.
The fall in gasoline prices was led by the Midwest, down 20.1 cents a gallon on average, and California, down 14.1 cents. Both areas experienced supply shortages from refineries earlier this summer, and now prices are returning to normal.
The plunge in gasoline prices means that as of Aug. 31, gasoline is again cheaper than diesel. For seven weeks through Aug. 24, diesel was cheaper — a situation that had not occurred since 2009.
Denton Cinquegrana, chief oil analyst for Oil Price Information Service, told Transport Topics that if recent oil price increases bring a stop to diesel’s price slide, it won’t cause a strong price increase.
“There’s still a lot of diesel out there and a lot of oil to be refined,” Cinquegrana said. “The price of diesel is not going up soon without a spike in demand for it.”
The Midwest harvest and winter heating offer competing demand for trucking’s main fuel, but Cinquegrana said the world supply picture for diesel is strong with unused international refinery capacity available.
He also noted the strong change since July 2009, the last time the diesel average was lower.
“2008 and 2009 was the classic case of a demand-driven drop in prices,” he said of the time when prices plunged because of the fierce recession.
“In contrast, 2014 to 2016 are a supply-driven decline,” Cinquegrana said of low prices during an oil glut.
