With crude oil prices this week reaching record high levels
of above $75 a barrel, diesel prices will stay solid in the foreseeable future,
energy experts say. Diesel will continue to follow the up-and-down pattern seen
over the last few weeks over the next month.
For the week ending July 3, diesel spiked 3.1 cents after
falling 4.8 cents the prior week, the Energy Information Administration (EIA)
reported. Because it typically takes between one and two weeks for crude oil
prices to get passed onto gasoline and diesel at the retail level, the $75 per
barrel price point will prevent a major rollback at the pumps.
“Crude oil goes a long way in determining prices of gasoline
and diesel,” Denton Cinquegrana, markets editor for the Oil Price Information
Service (OPIS) told FleetOwner. “If
the crude oil price continues to go up, that will obviously have an influence
on retail prices.”
As far as crude oil prices go, “It’s following world
events,” Cinquegrana explained. “Really, when you’re looking at crude at near
record levels it doesn’t have anything to do with immediate supply issues.”
On the positive side, there is currently more distillate—a
petroleum product that can be refined into heating oil and diesel
fuel—available than there has been in the past, as well as crude oil. On June
30, EIA reported that distillate stocks were 127.3 million barrels, which is a
10.1 (8.6%) million barrel increase over the same period last year. Crude oil
stocks were at the 341.3-million barrel mark, 16.4 (5%) million barrels more
than for the same period last year.
This is countered by high demand for distillate—especially
since commercial trucks have been traveling more miles year-over-year to meet
the demands of a growing U.S.
economy.
On June 1, refiners were required to import or refine 80% of
their supply of diesel at a spec of no greater than 15 parts per million (ppm)
of sulfur, otherwise known as ultra-low sulfur diesel (ULSD). Energy experts
from both OPIS and EIA have so far not heard of any significant supply problems
from refiners.
In spite of this, things aren’t rosy from the refiners’
perspective, either. According to an EIA economist, refiners aren’t producing
as much finished product as they would like.
“Lately U.S.
refiners have been processing 16-million barrels of crude per day,” Doug
Macintyre, EIA senior oil market analyst told FleetOwner. “That’s probably less than what you might normally
expect them to do given the current margins. If there were no problems I’d expect
refiners to process between 16.2 and 16.4 million barrel per day.”
Refining capacity remains hampered because some refineries
never completely recovered from damage caused by Hurricanes Katrina and Rita
and problems at a facility in Philadelphia.
Whether refining capacity will reach the 16.2 million
barrels per day mark is “a question,” Macintyre said. “Historically, we’ve seen
unplanned outages during July and August. Some could happen due to a severe
thunderstorm that knocks out power or if there’s a lot of hurricane activity.”
To comment on the article, write to Terrence Nguyen at tnguyen@fleetowner.com
