As oil pricing is tied less and less to strict supply-and-demand factors, fleet owners must more closely monitor stock market behavior and macroeconomic trends to get a sense of what they’ll pay for diesel fuel down the road. That’s the conclusion of several experts who follow global oil trends.
“Oil pricing is much more in line with the equity markets now and far less subject to traditional supply-and-demand pressures,” Denton Cinquegrana, editor-west coast spots for the Oil Price Information Service, told FleetOwner. “Oil prices – and the prices of the fuels refined from it – now react more and more to other economic trends than pure supply-and-demand factors.”
For example, he said, a fleet might see that fuel inventories are high, yet be paying five cents more per gallon of diesel than the week before. The reason for that may be largely in response to a run-up in the stock market, or a positive jobs report, or any other financial information that causes the equity markets to move higher, Cinquegrana explained.
“That’s why truckers need to take a ‘macro-economic’ view of fuel pricing now,” he stressed. “How the stock and financial markets behave can cause oil prices – and thus diesel costs – to rise or fall.”
So far, however, trucking is getting a break on the diesel fuel price front. According to Jon Langenfeld, transportation analyst with investment firm Robert W. Baird & Co., since peaking in mid-May, diesel fuel is down 5% to around $2.93/gallon as of the week of Sept. 6. But fuel prices notably increased 3% in early August from mid-July ahead of the traditional peak shipping season, he said.
For the year, diesel fuel prices are up 7% while crude oil is down roughly 11%. The recent crude oil price of $76/barrel dipped after reaching $82/barrel in early August. Excluding an early-August price spike, crude oil has traded within a $70-80/barrel range since falling from roughly $90/barrel in early May.
“Looking ahead, the easiest comparisons with 2009 have been lapped,” Langenfeld noted in his latest freight market report.
Near term, oil and diesel fuel prices are expected to remain on the weak side, according to the Energy Information Agency (EIA), the statistical arm of the Department of Energy (DOE).
“The global economic recession that began in 2008 and continued into 2009 has had a profound impact on world energy demand in the near term,” EIA noted in its recent energy outlook brief. “Total world marketed energy consumption contracted by 1.2% in 2008 and by an estimated 2.2% in 2009, as manufacturing and consumer demand for goods and services declined. Although the recession appears to have ended, the pace of recovery has been uneven so far, with China and India leading and Japan and the European Union member countries lagging.”
Global crude oil markets have been generally uneventful throughout 2010, with ample supply and a slow demand recovery in the U.S. and Europe, relative to more robust activity in China and other Asian countries dampening price pressures, the agency pointed out.
“Exceptionally high stock levels in the United States have contributed to relatively calm market conditions this summer,” EIA added. “U.S. commercial crude oil inventories stand at their highest level for August in nearly 20 years, and total U.S. petroleum commercial stocks – including crude oil and products – are the highest since January 1983.”
Nevertheless, crude oil prices are subject to change with shifts in global market conditions, the agency cautioned: “As we move into September, the potential for severe weather, particularly on the Gulf Coast, also injects a measure of unpredictability.”
