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Diesel prices fall below $4 per gallon mark

By Jeff Berman, Group News Editor
May 22, 2012

Diesel prices declined for the sixth consecutive week, according to the Department of Energy’s Energy Information Administration (EIA).

The price per gallon for diesel fell 4.8 cents to $3.956 per gallon, falling 0.5 cents short of last week’s 5.3 cent drop, which was the steepest decline in almost five months. The steepest decline in the last six months was a 6.6 cent decrease to $3.828 per gallon during the week of December 19.

Over the last six weeks of diesel declines, prices have dipped a cumulative 19.2 cents during that span. And prior to this most recent decline, the price per gallon had been above the $4 per gallon mark for 12 straight weeks.

On an annual basis, diesel is 4.1 cents less than it was a year ago.

In its recently updated short-term energy outlook, the EIA is calling for diesel prices to average $4.06 per gallon in 2012 and $4.03 in 2013, with oil pegged at $104.12 per barrel in 2012 and $103.75 in 2013.

Oil prices are currently at $92.13 per barrel on the New York Mercantile Exchange. This is down sharply from prices in the $106 range earlier this month. An Associated Press report said the decline is due to concerns about global economic growth and news that that Iran will allow the U.N. nuclear agency to restart a probe into its nuclear program.

Despite the fluctuation of oil prices, LM Oil and Fuel Columnist and Senior Analyst at Mercator International, LLC Derik Andreoli recently wrote that gasoline prices remained insulated from the rising cost of crude for a couple reasons.

“On the supply side, ethanol production increased rapidly over this period of time. Today, roughly one in ten gallons of gasoline consumed in the U.S. is derived from corn-based ethanol, which is a substitute for gasoline but not diesel,” wrote Andreoli. “Moreover, European gasoline demand has been supplanted by diesel, and old, inflexible European refineries were set up to maximize gasoline output. As a consequence, Europe’s surplus gasoline was, and is, exported to the U.S. East Coast. As gasoline supply climbed relative to diesel, U.S. gasoline consumption fell as a consequence of the recession. Only now is it rebounding as the economy limps along the path of recovery. With fuel economy increasing, however, demand is not likely to recover to pre-recession levels.”

Even with recent declines, shippers continue to keep a watchful eye on fuel prices and are taking steps to reduce mileage and cut down on empty miles. Steps like this were cited by many shippers at the NASSTRAC Logistics Conference & Expo earlier this month.

And as previously reported by LM, shippers continue to take steps to minimize the impact of fluctuating fuel costs. Over the years, they have maintained that this is imperative as higher diesel prices have the potential to hinder growth and increase operating costs, which will, in turn, force them to raise rates and offset the increased prices to consumers.

About the Author

Jeff Berman headshot
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. .(JavaScript must be enabled to view this email address).


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Article Topics

News · EIA · Diesel Prices · Diesel · All topics

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