Diesel prices see slight increase for second week in a row

Rising 0.6 cents to $1.989 per gallon, this follows a 0.3 cent increase last week. These slight gains follow 14 straight weeks of declines, during which the price dropped a cumulative 50.2 cents, with several of those weeks reaching low price levels not seen in several years.

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While the increase was again minimal, the average price per gallon for diesel rose for the second straight week, according to data issued by the Department of Energy’s Energy Information Administration (EIA).

Rising 0.6 cents to $1.989 per gallon, this follows a 0.3 cent increase last week. These slight gains follow 14 straight weeks of declines, during which 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 up 94.7 cents, and this week’s price is within close range to the $1.980 average recorded during the week of February 15, which was the lowest weekly average going back to the week of January 24, 2005, when it was at $1.959 per gallon.

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.

Reuters reported that Oil prices rose on Tuesday after China’s surprise monetary policy easing “stoked expectations for higher oil demand from the world’s largest commodities consumer and signs emerged that a global supply glut was starting to deflate,” with U.S. crude futures at $34.50 per barrel.

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


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