Diesel prices have shot up in recent weeks, including a 15-cent jump this week, but one expert doesn't believe we're in for another summer of record prices.
Denton Cinquegrana, senior markets editor, refined products, for the Oil Price Information Service (OPIS), believes "diesel is just catching up to gasoline."
"Prices for everything have been jumping dramatically the last couple of weeks and gasoline has been going up for awhile," he told Fleet Owner. "I wouldn't necessarily pin it to supply and demand."
The average price for a gallon of diesel climbed to $2.50, according to a report from Martin Labbe Associates. That's 15 cents more than last week and 27 cents higher than the week of May 18. Every region of the country reported an increase, led by an 18-cent jump in California to $2.68/gal.
The East Coast and Midwest each reported 15-cent increases to $2.52 and $2.47, respectively, while the Central Atlantic region posted the second-biggest jump at 16 cents to settle at $2.62. The West Coast, at $2.60 and New England, at $2.57, were the next highest in terms of price per gallon. The Lower Atlantic and Gulf Coast each came in at $2.47 and the cheapest diesel remains in the Rocky Mountain region at $2.44 despite a 10-cent a gallon increase.
A barrel of crude oil climbed this morning to $69.05, up 1.4%, following remarks yesterday by Paul Krugman. The Princeton University economist said he wouldn't be surprised "if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer," according to Bloomberg. Most observers believe an end to the recession will increase demand for diesel and gasoline.
The average price for a gallon of gasoline in the U.S. is $2.67.
"What is forcing prices up is the price of crude oil," said Cinquegrana. Crude traded as low as $32.40 a barrel on Dec. 19, 2008, rising since to hover around $70/barrel in the last few weeks, according to Bloomberg. Last year, it reached $147.27 as diesel prices climbed to $5/gal. or more in some areas. Last year at this time, the price of diesel was $4.69.
Cinquegrana mentioned that more money has been pumped into commodities in recent weeks, helping drive up the price of crude, as more traders look for safer investments until the global recession wanes. "Investors are looking toward a better situation, trying to get ahead of (the curve)," he said.
Diesel fuel demand remains 8 to 9% behind last year at this time, Cinquegrana said, adding that he doesn't foresee a climb to the record prices of a year ago. "If we were to see a rise to last year's prices, it will take something no one is predicting," he said.