The U.S. diesel average for the week of May 8 continued its descent of 13 of the last 14 weeks, falling another 9.6 cents to $3.922 per gallon and dropping below $4 for the first time since the first week of February 2022, just before the Russian invasion of Ukraine rocked energy markets, according to the latest data from the U.S. Energy Information Administration (EIA).
Just as the invasion in Eastern Europe was the catalyst that drove diesel and gasoline prices worldwide into the stratosphere, sagging demand and 2023's freight economy slowdown so far are bringing them closer to Earth, at least in the U.S., analysts told various outlets this week. EIA's U.S. gasoline average also fell for the week of May 8, by 6.7 cents to $3.533, leaving gas 38.9 cents cheaper than diesel, trucking's main fuel.
See also: When will the freight upturn arrive?
Diesel falling below $4 could be seen coming last week, the week of May 1, when the U.S. average dropped 5.9 cents to $4.018 per gallon, according to EIA.
Also, according to the new federal government and other data:
- Diesel's decline for the week of May 8 was the largest of 2023.
- Trucking's main fuel is $1.701 per gallon lower than a year ago.
- Gas, widely used by consumers and by some commercial fleets and work truckers who run lighter vehicles, is 79.5 cents lower than its level of a year ago.
- Another source, motor club AAA, also had diesel down substantially, 6.6 cents lower to $4.048 per gallon.
Regionally, diesel plummeted in some EIA regions and subregions more than it did nationally the week of May 8. Most notably, trucking’s main fuel fell 14.1 cents along the Gulf Coast to $3.613, the lowest per-gallon price of any EIA region or subregion.
Diesel in many other areas of the U.S. critical to trucking is falling below $4. On the East Coast, it dropped 8.7 cents to $3.986 per gallon. In the Midwest, the fuel fell far below $4, by 9 cents to $3.827. Elsewhere, diesel also was down but not below $4. In the Rocky Mountains, the fuel fell 4.1 cents to $4.105 per gallon, and it dropped 5.1 cents on the West Coast to $4.630, where trucking’s main fuel still is the most expensive in the nation, especially in California.
Demand starting to become driver of lower fuel prices
According to analysts cited by several outlets, demand now should be considered the principal reason why diesel and gasoline are headed south, though gas may level off during the summer driving season. Oil prices also are moderating and consistently floating at around $73 per barrel (West Texas Intermediate) and $76 (Brent crude). Falling diesel demand has been cited as an indicator the economy is headed toward recession if it isn't already there.
Demand for diesel has fallen sharply in recent months as freight markets cool, according to a Financial Times report, which cites government data crunched by S&P Global Commodity Insights to conclude that demand for distillates, which includes diesel, was 6% lower in the first quarter of 2023. According to a Reuters report, distillate futures fell year-on-year by nearly 50% on May 2, their lowest level since December 2021.
See also: Another survey sees spot market ‘close to turning a corner’
Trucking company executives and stakeholders have sounded off forthrightly for weeks about the demand slowdown and the general trough the industry is facing.
“Simply stated, we’re in a freight recession,” J.B. Hunt President Shelley Simpson said on the company’s Q1 earnings call on April 24. Knight-Swift Transportation CFO Adam Miller said last month during the company’s earnings call: “Freight demand in the first quarter was below expectations and more persistently soft than typical seasonal patterns. Weak demand pressured volumes and pricing while ongoing inflation was a further headwind on operating income.”
See also: J.B. Hunt executives grow more cautious on market turn
"I think a lot of these little ones are going out of business," Bob Costello, chief economist at American Trucking Associations, told The Wall Street Journal last month, about smaller U.S. trucking companies. Trucking companies with fleets of 200 to 300 vehicles are failing at a rate of about one per week, Costello told The Journal.
In his May 8 blog, GasBuddy's head of petroleum analysis, Patrick De Haan at GasBuddy, which mainly tracks gasoline trends, said, “For the third straight week, consumers have been greeted by falling gasoline prices across a majority of the country, thanks to oil prices holding near recent lows and the transition to summer gasoline being essentially complete. While there have been a few pockets of rising prices, those have been the needle in the haystack, with nearly every single state seeing gas prices fall."
On diesel, De Haan said: "The average price of a gallon of diesel will join gasoline in the days ahead, falling below $4 per gallon in the next 48 hours or so, a sign of how far we’ve come. Americans are spending hundreds of millions less on fuel every week compared to a year ago, and that’s a number that could rise further as prices are poised to continue trending lower this week.”
