Diesel prices continue steady upswing, says EIA

In what has again become a common occurrence, diesel prices are up once again this week, going up $0.8 cents to $3.438 per gallon, according to the Department of Energy’s Energy Information Administration (EIA). The EIA added that current prices are up 65.7 cents per gallon compared to last year.

By ·

In what has again become a common occurrence, diesel prices are up once again this week, going up $0.8 cents to $3.438 per gallon, according to the Department of Energy’s Energy Information Administration (EIA). The EIA added that current prices are up 65.7 cents per gallon compared to last year.

This increase marks the ninth straight week prices have risen for a cumulative 27.6 cent gain along with it marking the third straight week prices have topped the $3.40 per gallon level since hitting $3.482 during the week of October 20, 2008.

Diesel prices have been at $3 per gallon or more for 18 consecutive weeks. Prior to the week of October 4, when diesel prices hit $3.00 per gallon, the price per gallon of diesel was below the $3.00 mark for 18 straight weeks. But the recent rise in prices is in line with gains in the price per barrel of crude oil, which has been hovering in the mid-$80s to high $90s, on average, during the same period. 

Last week, oil barrel prices were trading at $86.64 on the New York Mercantile Exchange for an eight-week low, due to concerns over increasing supplies and a strengthening dollar, according to a MarketWatch report. But despite this recent decrease, there is increasing speculation that the price per gallon of diesel and regular gasoline could approach the $4 per gallon level, due to things like higher global demand for oil and a cold winter in many parts of the United States and Europe, leading to higher oil prices, according to media reports.

What’s more political unrest in Egypt is also factoring into higher oil prices, with a Financial Times report indicating that oil is now trading at $92.19 per barrel on the New York Mercantile exchange. The FT report added that this situation has the potential to “disrupt oil flows from the Middle East, which accounts for almost a third of global supply.”

If these oil increases are to continue, it will likely lead to a scenario where shippers need to be prepared to plan for them accordingly, especially when taking into consideration the relatively low fuel prices they factored into transportation budgets for much of 2010.
And should prices return to the record-breaking levels of 2008, when diesel was $4.78 per gallon and barrel prices were in the $150 range, it could lead to a return to the past in which fuel consumption patterns forced shippers to consider things like bringing more manufacturing operations closer to home—a practice also commonly referred to as near-shoring or near-sourcing.

The EIA is calling for 2011 crude oil prices to hit $93.42 per barrel, according to its recently-revised short-term energy outlook. This is above previous estimates of $79.41 per barrel for 2010 and $85.17 per barrel for 2011.  On the diesel side, the EIA is calling for the price per gallon of diesel in 2011 to average $3.40, up from a previous estimate of $3.23.

Derik Andreoli, a doctoral candidate at the University of Washington focusing on the interactions between oil and the economy, wrote in a recent blog for LM that the most important take-away of increasing oil and gas prices is that recent fuel price movements reflect emerging market conditions.

“The global economic recovery is causing markets to tighten and prices to rise and become more volatile,” wrote Andreoli. “While speculation feeds volatility in the short run, long-term trends are driven by the underlying fundamentals of supply and demand. As the world economy continues along the bumpy road to recovery, there are strong indications that oil producers will have a difficult time keeping pace. As a consequence, we should expect rising prices and high levels of price volatility to persist into the foreseeable future.”


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
SaaS Supply Chain Management Systems
A guide to better understanding the market, the software and the benefits
Download Today!
From the November 2016 Issue
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL) provider that could successfully combine transportation services and technology capabilities under one roof.
Warehouse & DC Operations Survey: Ready to confront complexity
2016 Quest for Quality Awards Dinner
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Digital Evolution: Streamlining Logistics and Supply Chain Operations
In this FREE virtual conference we'll define the challenges facing operations and offer solutions designed to create dynamic, automated networks that offer seamless communication, improved collaborative third-party relationships, and the ability to respond to changes at a moment's notice.
Register Today!
EDITORS' PICKS
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...
Making the TMS Decision: Ariens Finds Just the Right Fit
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL)...

Motor Carrier Regulations Update: Caught in a Trap
The fed is hitting truckers with a barrage of costly regulations in an era of scant profits....
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...