Diesel prices up for eighth straight week, according to EIA
January 25, 2011
Diesel prices were up again, rising 2.3 cents to $3.430 per gallon for the week of January 24, according to data released this week by the Department of Energy’s Energy Information Administration (EIA). The EIA added that current prices are up 59.7 cents per gallon compared to last year.
This increase marks the eight straight week prices have risen for a cumulative 26.8 cent gain along with it marking the second 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 17 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 low $90s, on average, during the same period.
Oil barrel prices are currently 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.
Where these prices head in 2011 remains to be determined, with estimates ranging from $75-to-more than $100 per barrel.
“We are looking at the second fuel price apocalypse of the 21st century,” said Tom Kloza, chief oil analyst for Oil Price Information Service, in a Los Angeles Times report. “Money flow is the performance-enhancing drug for prices. A spring peak in the neighborhood of $100 a barrel or higher is likely” for crude oil.
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.”
For more stories on oil and diesel prices, click here.
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