The national average price for a gallon of diesel rose 30.8 cents to $2.898 last week as market fears of a severe energy supply chain disruption following Hurricane Katrina sent traders and consumers in panic, the Energy Information Administration (EIA) said. EIA economist Jacob Bournazian told FleetOwner that with the major pipelines intact and refineries coming back online, diesel prices are set to either plateau or fall back in the coming weeks.
Diesel prices were spared the worst of fuel price spikes, as during the same period, EIA reported gasoline prices had risen 45.9 cents. Seasonally low summer demand kept diesel prices relatively stable. However, there remains some uncertainty whether diesel supplies will be restored quickly.
“[Diesel] didn’t go up 50 to 80 cents like gasoline did because there were the inventories to draw on,” Bournazian said. “But the key point is that you can’t go after these inventories too aggressively in September. Whatever draws [from diesel inventories] taken last week will affect whether diesel will fall or plateau over September. Depending on supply conditions, over the next two weeks diesel prices could either plateau or fall back 10-15 cents.”
Wholesale diesel prices spiked temporarily up 35 cents before the market settled to just ten cents over pre-Katrina level, Bournazian explained. That reduction in wholesale prices had not yet been mirrored at the retail pumps; that depends on whether the terminals are satisfied that normal diesel supplies come back online.
“It’s difficult to predict what will happen with diesel because this is really an unprecedented disruption in the energy market,” Bournazian said. “There’s plenty of room for retail prices to fall; all the good news on the infrastructure is out, but now it’s just up to the supplies to recover so that normal price trends could occur.”
Over the past week, all regions posted a price hike, but prices held the steadiest in California after an increase of “only” 20.5 cents to $3.25. California is still the most expensive region to buy diesel, however. The Central Atlantic region saw the largest price spike, up 33.9 cents to $2.993. The Gulf Coast averaged the cheapest diesel at $2.833.
