Diesel prices dip for eighth week in a row, at lowest level since May 2009

Diesel prices dropped 2.4 cents this week to $2.211 per gallon, according to data issued by the Department of Energy’s Energy Information Administration.

This marks the eighth straight week of declines going back to the week of November 9, when the national diesel average stood at $2.502 per gallon. Since then the average price per gallon has fallen a cumulative 29.1 cents. And the average price per gallon is now at its lowest level since the week of May 4, 2009, when it was at $2.185.

Compared to the same week a year ago, the average price per gallon of diesel is down 92.6 cents.

The Department of Energy’s Short-Term Energy Outlook recently called for the 2015 average price of diesel to be $2.71, with 2016 expected to be lower at $2.67. It also called for WTI crude oil to hit an average of $49.08 in 2015 and $50.89 in 2016.

Benchmark crude oil is currently trading at $36.76 per barrel and remains near its lowest levels since February 2009. This low price comes at a time when oil production remains high, with OPEC declining to reduce its output while the sector remains heavily oversupplied, and in turn, keeping prices low. A CNN report said that current OPEC output is at 30 million barrels per day, with actual daily production estimated at 31.5 million barrels.

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.
 
The drop in diesel costs also is a result of heavy investments by refiners in recent years to make a range of products known as “middle distillates” that include diesel, jet fuel, heating oil and kerosene.