Fleetowner Com Sites Fleetowner com Files Uploads 2014 10 Fuel Up
Fleetowner Com Sites Fleetowner com Files Uploads 2014 10 Fuel Up
Fleetowner Com Sites Fleetowner com Files Uploads 2014 10 Fuel Up
Fleetowner Com Sites Fleetowner com Files Uploads 2014 10 Fuel Up
Fleetowner Com Sites Fleetowner com Files Uploads 2014 10 Fuel Up

Welcome projections for winter fuel prices

Oct. 9, 2014
So the Energy Information Administration (EIA) issued its Short Term Energy Outlook and Winter Fuels Update this week and if even half of the agency’s predications come true it’ll be a very merry (if not warm) winter for truckers – at least in terms of fuel prices.

For starters, EIA projects average U.S. household expenditures for natural gas, heating oil, electricity, and propane will decrease this winter heating season – which runs from October 1 through March 31 – compared with last winter, which was 11% colder than the previous 10-year average nationally.

Projected average household expenditures for propane and heating oil are 27% and 15% lower, respectively, because of lower heating demand and prices – contributing to natural gas and electricity expenditures that are 5% and 2% lower than last winter, the agency said.

On top of that, driven in large part by falling crude oil prices, U.S. retail prices for both regular-grade and diesel and projected to keep falling, too.

EIA said that retail prices for gasoline dropped to an average of $3.41 per gallon in September – some 29 cents below this past June’s average –with gasoline prices expected to keep right on falling to an average of $3.14 per gallon by December.

Overall, the agency EIA expects the U.S. retail price for regular-grade to average $3.45 per gallon when 2014 is all said and done before inching down in 2015 to $3.38 per gallon – compared to the average of $3.51 per gallon posted for 2013.

Meanwhile, while diesel fuel prices averaged $3.92 per gallon in 2013, that’s projected to decline down to an average of $3.85 per gallon for all of 2014 and then $3.80 per gallon in 2015.

What’s driving such a rosy fuel price forecast? Well, EIA believes that weaker global demand for crude oil combined with rising U.S. production of the black stuff and warmer-than-last-year winter temperatures are behind this projected falloff.

Weakening global demand pushed down the critical North Sea Brent crude oil spot prices fall to an average of $97 per barrel in September – the first month Brent prices have averaged below $100 per barrel in more than two years – with EIA predicting that Brent crude oil prices should end up averaging $98 per barrel in the fourth-quarter of 2014 before rising back up to $102 per barrel in 2015.

Again, rising U.S. crude oil production is also helping lower global oil prices and reduce imports as well, as domestic production averaged an estimated 8.7 million barrels per day (bbl/d) in September – the highest monthly production since July 1986.

Total crude oil production – which averaged 7.4 million bbl/d in 2013 – is expected to climb up to an average of 9.5 million bbl/d by 2015. If realized, the 2015 forecast would be the highest annual average crude oil production since 1970.

EIA added that another factor that should help stabilize diesel prices this winter is not only reduction in heating oil demand across many parts of the U.S. but slippage in heating oil prices as well – critical trends as diesel fuel and heating oil are both produced from the same crude oil distillate.

EIA expects households heating primarily with heating oil to spend an average of $362 or 15% less this winter compared to last winter, reflecting prices that are 25 cents per gallon cheaper – some 6% less – combined with 10% lower consumption.

“Unless severe weather in the U.S. Northeast coincides with severe weather in Europe, demand [for heating oil] should be readily met via supplies from the Atlantic Basin market,” EIA noted in its forecast. “Reliance on heating oil is highest in the Northeast, where about 23% of households depend on it for space heating. Yet only 5% of households nationally use heating oil.”

Even new regulations that go into effect January 2015 that limit marine vessel diesel fuel sulfur levels in certain coastal waters to 1,000 ppm isn’t expected to cause much of an issue, the agency noted.

“Some vessels are expected to switch from using residual fuel oil to distillate because of its lower sulfur content,” EIA noted. “However, the effect on the Northeast heating oil market should be limited because marine fuel demand in this [Northeastern] region is relatively small.”

Ah but the weather is a fickle thing – indeed, this forecast is decidedly mixed about whether or not the winter of 2014-2015 will be as frigid as the 2013-2014 season or as mild as EIA’s prognosticators project.

We’ll know for certain in a handful of weeks, won’t we?

About the Author

Sean Kilcarr 1 | Senior Editor

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