Diesel fuel prices are currently on a tear, rising by an average of over 10 cents per gallon in the U.S. in the last two weeks. That is largely due to tight global diesel supplies and increased production of home heating oil in the U.S., which is made from the same base oil stock as diesel fuel.
“Demand, while not very strong in the U.S., [is coming from] exports to other markets – most notably South America,” he added. “The exports are helping inflate demand [for diesel production] here.”
The U.S. Energy Information Administration (EIA) stated in its weekly on-highway diesel fuel prices update that the U.S. average price is now $3.825 per gallon, up from $3.801 last week and $3.721 during the week of October 10. Diesel fuel prices are now over $4 on the West Coast – averaging nearly $4.05 per gallon, with California a shade under $4.10 per gallon – with prices the lowest on the Gulf Coast, now standing at $3.745.
OPIS’s Cinquegrana also pointed out that the U.S. is now entering the winter season, and that will lift heating oil futures prices-- as they do every year at this time.
Indeed, EIA noted in its most recent Short-Term Energy and Winter Fuels Outlook (STEO) that the average price paid by households in the Northeast for heating oil more than doubled over the last seven winters, rising from an average of $1.45 per gallon during the winter of 2003-04 to an average of $3.38 per gallon during the winter of 2010-11.
According to EIA projections, residential heating oil prices this winter are expected to set a new record for the winter of 2011-2012, averaging $3.71 per gallon, an increase of 10% over last winter.
This spike in diesel prices is a reversal of sorts from the price climate trucking companies have enjoyed over the last few months.
Werner Enterprises, for example, said in its third-quarter earnings statement that while its average diesel fuel cost was 91 cents per gallon higher when compared to the third quarter of 2010, that cost hadfallen 11 cents per gallon from the second quarter this year.
For the first 18 days of October this year, Werner said its average diesel fuel price per gallon was 62 cents higher than what it paid per gallon over the same period in 2010-- and 55 cents higher compared to its fourth quarter 2010 fuel cost.