November 5, 2018 5:00 PM, EST

Diesel Continues to Slide, Drops 1.7 Cents to $3.338 a Gallon

fuel pumpDaniel Acker — Bloomberg

The U.S. average retail price of diesel dropped 1.7 cents to $3.338 a gallon as prices for West Texas Intermediate crude oil continued to sink despite concerns that global supplies could fall amid U.S.-imposed sanctions on Iran.

It was the third consecutive weekly decline in the price of diesel.

Still, trucking’s main fuel costs 45.6 cents a gallon more than it did a year ago, when the price was $2.882, the Department of Energy said Nov. 5.

Average prices fell in all regions of the country. The highest one was in California at $4.068.

The national average price for regular gasoline fell 5.8 cents to $2.753 a gallon, DOE’s Energy Information Administration said. The average is 19.2 cents higher than it was a year ago.

Phillips 66 logo

Scheduled outages at U.S. refineries in the fourth quarter are not likely to result in any regional or national shortfalls in the supply of petroleum products, including gasoline and distillate fuel — primarily ultra-low sulfur diesel used in transportation and to a lesser degree as heating oil — compared with expected demand, according to an EIA analysis.

EIA reached this conclusion despite the current high level of U.S. gasoline demand, which in 2018 has been close to the record high seen in 2017.

Meanwhile, oil refiner Phillips 66 and Renewable Energy Group Inc. announced plans for the construction of a large-scale renewable diesel plant on the West Coast.

The plant would utilize Renewable Energy’s proprietary BioSynfining technology for the production of renewable diesel fuel. Planned feedstocks include a mix of waste fats, oils and greases, including regionally sourced vegetable oils, animal fats and used cooking oil, according to the companies.

The facility would be constructed adjacent to the Phillips 66 Ferndale Refinery in Washington state. The Ferndale Refinery offers existing infrastructure, including tank storage, a dock and rail-and-truck-rack access.

“The West Coast is an attractive market for us; we currently sell a number of products there to a number of segments, including trucking,” Renewable Energy spokeswoman Katie Stanley said.

“Renewable diesel has contributed growing but still small volumes to the U.S. transportation fuel market and has been constrained by a lack of domestic production capacity,” industry analyst Tristan Brown wrote recently on the investor site Seeking Alpha.

The energy content and performance characteristics of renewable diesel are almost identical to those of petroleum-derived diesel fuel, “but with the added benefit of having much lower emissions of pollutants such as sulfur and particulate matter,” Brown wrote.

At the same time, one truck maker based in the Northwest suggested hybrid diesel trucks could play a strong role in meeting emission regulations in urban environments.

Harrie Schippers

Paccar Inc. President Harrie Schippers. (Studio040NL/YouTube)

“I think there’s a growing sentiment that maybe the diesel [engine] with a zero-emission hybrid capability may be the best economic solution for those inner-city applications where you need that zero-emission requirement,” Paccar Inc. President Harrie Schippers said during a recent earnings conference call.

Paccar is the parent of the truck brands Kenworth Truck Co., Peterbilt Motors Co. and DAF.

A full-electric option still requires a breakthrough on the batteries and the weight, he said. Otherwise, “the economic case is a bit challenging.”

Schippers also is Paccar’s chief financial officer.

One petroleum analyst sees prices continuing to fall for oil and diesel.

“I think there are [pricing] headwinds across the board, quite honestly. Things with diesel have been trending lower. Ultra-low-sulfur diesel futures are down 12 or 13 cents,” Denton Cinquegrana, chief oil analyst at Oil Price Information Service, told Transport Topics on Nov. 2.

Oil prices remain high for some markets such as India, Argentina and Turkey that pay for oil that is priced in dollars. “So there has been some concern about demand destruction,” he said.

U.S. sanctions recently reimposed on Iran oil sales stoked additional concerns of a tightening supply in the market.

But Cinquegrana said Iran is no stranger to sanctions and has “little tricks up their sleeves” for getting some of its oil onto the market somehow.

One method is turning off transponders on its oil tankers so the ships cannot be easily tracked, he said, or they have brought oil into neighboring Iraq and shipped from there.

“To get [Iran’s] exports down to zero is really a tall order,” Cinquegrana said.

Secretary of State Mike Pompeo said Nov. 5 that China, India, Japan, South Korea, Taiwan, Italy, Greece and Turkey have been granted waivers that will allow the countries to keep buying Iranian oil temporarily.

West Texas Intermediate crude futures on the New York Mercantile Exchange closed at $62.85 per barrel Nov. 5 compared with $67.04 on Oct. 29.

Oil prices have fallen 15% from $74.34 on Oct. 5.