U.S. diesel fuel prices continue to climb steadily higher this holiday season-- driven up largely by perception rather than reality, according to experts. The average price for diesel fuel in the U.S. reached $3.248 per gallon this week, according to the Energy Information Administration (EIA). That’s up nearly two cents from $3.231 per gallon during the week of Dec. 13 and up five cents from $3.197 two weeks ago.
However, Denton Cinquegrana, editor—West Coast Spots for the Oil Price Information Service (OPIS), told Fleet Owner that 90% of the current surge in diesel fuel prices is caused by the mere perception global demand for diesel fuel is exceeding projected supplies.
“The period between the Thanksgiving and Christmas/New Year holidays really is the ‘silly season’ when it comes to fuel and oil prices, because perceptions play a huge role in market dynamics right now; thus a lot of weird things happen,” Cinquegrana said.
For example, diesel price increases are occurring even though in its most recent short-term energy outlook, EIA projected global oil consumption growth would slow to 1.4 million bb/d (barrels per day) in 2011-- that after increasing some 2 million bbl/d this year.
Among the countries that are members of the Organization for Economic Cooperation and Development (OECD) , only the U.S. is expected to show any significant growth in oil consumption volume in 2011, EIA said, and that will be by a paltry 200,000 bbl/d.
“That’s why it’s all about perception right now and why it seems the bullish prognosticators outweigh the forecasts of the bearish ones,” Cinquegrana said.
California registered the highest diesel fuel pump prices in the U.S. this week, according to EIA, at $3.407 per gallon, followed by the Central Atlantic and New England regions ($3.381 and $3.375 per gallon, respectively).
The Gulf Coast region currently has the lowest diesel prices in the nation at $3.183, the Lower Atlantic region is lose behind at $3.193.
One major concern with the recent uptick in diesel fuel prices is how it will impact municipal budgets in the U.S. over the first six months 2011, Cinquegrana noted. That’s because municipalities rely on a variety of vehicles to perform services, such as garbage trucks, buses and snow plows.
“It will be interesting to see what kind of havoc higher [fuel] prices will wreak, as their [municipal] budgets are already strained,” he said.