The average diesel price in the U.S. decreased fourteen cents to $4.21 for the week of August 18, according to the Energy Information Administration (EIA). This marks the fourth consecutive week prices fell at least a dime, as the average price of a gallon of diesel dropped $0.51 during that time span.
“To come down fifty cents so quickly came as a big surprise. [Crude] oil was going down three, four, five dollars a day, so it was surprising the pace that led us to where we are,” Denton Cinquegrana, markets editor for the Oil Price Information Service (OPIS), told FleetOwner.
Crude oil fell as low as $111.64 a barrel today, the lowest level it had reached in four months, according to CNNMoney.com, but prices increased above $115 later in the day due to supply concerns.
The most expensive area of the country continues to be New England, where a gallon of diesel averages $4.42, followed closely by the Central Atlantic region, which averages $4.41. The least expensive area is the Midwest, where the average is $4.13.
According to the latest EIA Short Term Energy Outlook, the price of West Texas Intermediate crude oil went from $122 per barrel on June 4 to $145 per barrel on July 3, but back down to $119 per barrel on August 5. EIA projects crude oil to average $119 per barrel this year and $124 in 2009, with diesel prices projected to average $4.18 in 2008 and $4.27 in 2009.
Falling demand plus the recovering U.S. dollar helped bring prices down, Cinquegrana added. In addition, people made what could be permanent changes including trading in gas guzzlers for more fuel-efficient cars and carpooling, turning what was at first an inconvenience into everyday routine, he said.
The prices may be aided by production increases, as non-OPEC supply is projected to rise about 510,000 barrels per day (bbl/d) in the second half of 2008 and 850,000 bbl/d in 2009, while OPEC production is expected to rise about 600,000 bbl/d in the third quarter from the second quarter, EIA said.
However, EIA said that despite an 800,000 bbl/d drop in U.S. consumption during the first half of 2008, global consumption rose by roughly 500,000 bbl/d due to a 1.3-million bbl/d rise in consumption outside of the Organization for Economic Cooperation and Development (OECD). The 800,000 decrease was the largest half-year consumption decline in the last 26 years, EIA said.
Yet while total world oil consumption is expected to grow more than 1 million bbl/d during the second half of 2008, the projection for 2009 has fallen about 460,000 bbl/d from July’s assessment, EIA said, as expectations for U.S. and other OECD countries has fallen substantially.
“Downward price pressures would increase if the economic slowdown proves deeper or longer than expected, and if higher prices lead to lower consumption and lower demand for OPEC crude than currently anticipated,” the EIA report said. “There is also a risk that any weakness in oil prices could be minimal or short-lived, especially if consumption growth exceeds current expectations or if oil production capacity expansion plans in either OPEC or non-OPEC nations turn out to be lower than expected.”
OPIS’s Cinquegrana added that he believed crude oil has leveled off, staying in the $112 to $114 range the past week, where it will most likely remain over the next month or two, although he added that on-the-road prices still have a little more catching up to do, and could fall an additional five to ten cents over the coming weeks.
“If conditions stay the way they are and demand stays the same, we could see further decreases,” Cinquegrana said. He added that it was possible that U.S. consumers could see $3 per gallon—or possibly lower—fuel for both gasoline and diesel sometime in the future.