Diesel drops for 14th week in a row, at lowest level since January 2005

The average price per gallon of diesel gasoline dropped for the 14th consecutive week, the Department of Energy’s Energy Information Administration (EIA) said yesterday.

Falling 2.8 cents to $1.980 per gallon, EIA said that this marks the lowest weekly average going back to the week of January 24, 2005, when it was at $1.959 per gallon.

Diesel prices have seen a cumulative 50.2-cent drop over the 14-week stretch of declines, with several of these weeks reaching low price levels not seen in several years.  On an annual basis, the current price per gallon is down 88.5 cents.

Because of the volatile nature of fuel prices, shippers are accustomed to tough negotiations with carriers on fuel surcharges. Now that diesel prices have fallen, shippers say more will be expected of them to keep those savings for their companies.

Shippers say that the current ongoing decrease in diesel costs is beneficial from a financial perspective, and after several years of high fuel costs, many shippers began tracking diesel much more closely.

In the past, diesel had cost more than gasoline because U.S. refineries export much of their diesel output. That leaves less available for the domestic market, and federal taxes are higher for diesel than for gasoline. But as gasoline demand has risen around the world, refineries are running full out worldwide to meet that demand, resulting in a relative glut of diesel fuel, experts say.
 
Oil analysts explain that the drop in diesel would indicate a worldwide glut in crude oil is becoming a glut in refined products as well. This could keep diesel prices at these depressed levels well into 2016, they say.

Oil is currently trading at $33.17 on the New York Mercantile Exchange.

A Reuters report said that prices continue to be dragged lower by a broad decline across major financial markets and by a growing expectation that global demand will not grow quickly enough to erase the overhang of unwanted crude any time soon. And it added that the world will store unwanted oil for most of 2016 as declines in U.S. output take time and OPEC is unlikely to cut a deal with other producers to reduce ballooning output, according to the International Energy Agency.