Diesel costs likely to rise

By Staff -- Logistics Management, 3/1/1999

Low fuel prices have helped carriers, private-fleet operators, and shippers contain transportation prices over the last year or more, but prices may be on their way back up. Prices for diesel fuel and other petroleum products, though, are not likely to climb very far.

The federal Energy Information Administration's monthly Short Term Energy Outlook for January forecast that the world oil price would rise to about $13.00 a barrel by the end of this year, up from $9.25 in December 1998. The forecast looks for prices to climb past $14.00 a barrel by the end of the year 2000--still well below the 1997 average of $18.60 per barrel.

Higher crude prices, of course, eventually will translate to higher prices for diesel fuel. The Outlook foresees retail diesel prices reaching $1.07 per gallon by the end of this year and $1.11 by the end of the following year. Again, while up from current prices, which are hovering below $1.00, these forecast prices are well below the painful levels reached in 1997.

The forecasters expect prices to rise because of growing demand for heating oil and propane as the nation returns to normal weather patterns and demand from the transportation sector grows. The EIA expects to see accelerated growth in worldwide demand for petroleum products through the year 2000. It also predicts U.S. petroleum demand will increase by 2.9 percent, or 500,000 barrels a day, this year.