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January 4, 2021 5:45 PM, EST

Diesel Continues Upward Trend, Rises 0.5¢ to $2.640

Trucks fueling up at a Pilot stationDiesel is 43.9 cents less expensive than it was a year ago during the same week. (John Sommers II for Transport Topics)

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The last days of 2020 and the first few of 2021 continued the same trend, with diesel prices rising nationwide.

According to the Energy Information Administration’s weekly survey released Jan. 4, trucking’s primary fuel price increased by five-tenths of a cent to $2.640 a gallon.

Still, diesel remains 43.9 cents less expensive than it was at this time in 2020.

The average gasoline price increased by a nearly identical amount, six-tenths of a cent, to reach $2.249 a gallon nationally. That’s 32.9 cents per gallon cheaper than a year ago.

Diesel increased in nine of the 10 regions surveyed by EIA. The largest gain came in the New England region, where the price jumped 1.3 cents to $2.665 a gallon. Diesel there is 46.2 cents less expensive than it was at this time in 2020.

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The smallest increase was in the West Coast region, not including California, where the price rose one-tenth of a cent to $2.771 a gallon. Diesel costs 49.3 cents less there than it did a year ago.

In the only region that showed a decline, the Rocky Mountain, diesel dipped two-tenths of a cent to $2.586 a gallon. The fuel is 51.4 cents a gallon less expensive there than it was last year.

The most expensive diesel is in California, where a gallon costs $3.404, up five-tenths of a cent from the previous week. Diesel in the Golden State is 49.1 cents less expensive than it was at this time in 2020.

Diesel was least expensive in the Gulf Coast region, home to much of the nation’s oil production and refining capacity. It costs $2.398 a gallon, up five-tenths of a cent from last week and 43 cents less than it was a year ago.

Meanwhile, Saudi Arabia, on Jan. 5, announced it would unilaterally cut oil production by 1 million barrels a day, beginning in February.

Tom Kloza, co-founder and global head of energy analysis for Oil Price Information Service

Kloza

Oil Price Information Service founder and industry analyst Tom Kloza told Transport Topics that the surprise move by oil officials in Riyadh is an indication that the kingdom is worried that a resurgent COVID-19 pandemic could threaten the world’s economic recovery.

The Saudi move comes as the price of West Texas Intermediate crude oil, the industry benchmark fuel for oil traders, crossed and stayed above $50 per barrel.

“I think the Saudis are looking at the statistics that show an escalation in the virus cases in Asia,” Kloza said. “I think they are taking one for the team again, saying they are cutting production by a million barrels a day in February and a million barrels a day in March on our own, voluntarily. They don’t have to do that. The Saudis have demonstrated they are willing to be the ‘swing producer.’ ”

Kloza said that production cuts will keep oil supplies in balance until COVID-19 vaccines are distributed worldwide, and the global economies begin to show signs of a consistent recovery later in 2021.

EIA reported a crude oil inventory draw of 8 million barrels for the last week of 2020, despite hefty builds in fuel inventories.

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A crude oil draw is defined as a decrease in reserves at the specified repository.

EIA provides a weekly update on domestic inventories. Its report also updates total stockpile levels that can be compared with average stockpile readings from past years.

“We’re starting out the year with a little bit of a sugar rush, a little bit higher crude price and diesel price,” Kloza said.

EIA also reported that the last week in December, no oil was imported into the U.S. from Saudi Arabia. Kloza said it shows that, at least for the time being, the U.S. is not nearly as reliant on oil from the Middle East as it used to be.

To put that into perspective, 20 years ago, the U.S. imported more than 45 million barrels of Saudi crude oil every month, according to EIA.

Phil Flynn, an oil analyst with the Price Futures Group of Chicago

Flynn

Chicago-based oil analyst Phil Flynn told TT that oil at $50 a barrel or more means some traders believe the global economy will recover later in 2021.

“This is a kind of a step back to normalcy,” Flynn said. “We all liked low oil prices, but having oil prices in the $50 range is a sign that there’s some life in the economy. Fifty dollars means we are making that long road back to normal. We are getting back to some equilibrium.”

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