Diesel prices see gains for the fifth straight week

The Department of Energy’s Energy Information Administration reported this week that the average price per gallon for diesel gasoline saw an increase for the fifth week in a row.

With a 2 cent increase, the average price per gallon now stands at $2.119, coming on the heels of a 7.8 cent gain last week, which saw the average price head above the $2 benchmark for the first time since the week of February 15, when it was at $2.008 per gallon.

Over the last five weeks of gains, diesel prices have risen a cumulative 14.9 cents. Prior to these gains, prices fell for 14 consecutive weeks during which time the price dropped a cumulative 50.2 cents, with several of those weeks reaching low price levels not seen in several years.

On an annual basis, the average price per gallon is down 74.5 cents.

The current national average price for diesel at $2.119 is nearly exactly in line with the projected 2016 average of $2.12 in the most recent Short-Term Energy Outlook issued by the EIA. 

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.

LM Columnist Derik Andreoli recently wrote that the current oil oversupply is not likely to be worked off over the course of the year, explaining that this suggests that although there will be significant volatility, prices should follow a horizontal trend, meaning that prices are expected to remain around $30 per barrel.

And the International Energy Agency recently said oil prices are not expected to recover in a meaningful way until 2017, coupled with slower growth in global supplies.

WTI crude is currently at $41.04 on the New York Mercantile Exchange.