By Jonathan S. Reiskin, Associate News Editor
This story appears in the Feb. 16 print edition of Transport Topics.
Driven by a freight-scarce economy, abundant fuel inventories and predictions of continuing economic distress, the average price of U.S. retail diesel drifted down another 2.7 cents a gallon to $2.219 last week, its fourth straight decline and the 28th in the past 30 weeks.
The diesel average is now at its lowest level since Memorial Day 2005. It has fallen 53.4% from its July 14 peak of $4.764 a gallon; a year ago the diesel average was $3.28 a gallon.
The Department of Energy’s weekly report, on Feb. 9, showed the average price of gasoline rose 3.4 cents a gallon to $1.926, the fifth increase in six weeks after hitting a nearly five-year low at the end of December.
Crude oil prices dropped to about $34 a barrel on Feb. 12 from $41 on Feb. 5 but remained just within the general price range they have occupied since early December — $34 to $49 a barrel. Despite the fall in crude prices last week, analysts suggested that the oil-price collapse since the record peak last July of more than $145 a barrel could be nearing an end.
“As demand [for crude oil] picks up, you will see the hedge funds jump back in. As demand picks up, you will see some increase in prices,” said an executive of Pilot Travel Centers, Knoxville, Tenn., the nation’s largest truck-stop chain.
“We think the petroleum markets will continue to be very volatile. Oil is reflecting market fundamentals now for the first time in three years,” Mark Hazelwood, Pilot’s executive vice president, said at the BB&T Capital Markets transportation conference last week.
Hazelwood predicted that oil prices are more likely to rise by $20 a barrel rather than to fall further, but he also said prices could test the low-$30 range again.
Bob Costello, American Trucking Associations’ chief economist, agreed.
“The price of oil is going to be higher than we’ve seen, historically. Be prepared for demand for crude to come back,” Costello said Feb. 11 at a meeting of the Tire Industry Association.
Costello said he is anticipates oil prices of about $75 to $90 a barrel, with diesel about $3.50 a gallon.
Some members of the Organization of the Petroleum Exporting Countries last week said they would act to raise world oil prices. Bloomberg News said the Venezuelan oil minister wants “to take additional measures” at OPEC’s March meeting “to guarantee that the price stabilizes and afterwards recovers its fair value.”
However, the early-February decline in oil prices occurred even as OPEC has cut production. Platt’s OPEC Survey said January production was 29 million barrels a day, down from 29.9 million in December. Platt’s is an energy research subsidiary of the McGraw-Hill Cos.
On Feb. 10, DOE’s Energy Information Administration issued its Short-Term Energy Outlook and predicted low petroleum prices would continue, based on the assumption of a 2.7% decline in U.S. gross domestic product this year.
The report predicted crude oil will average $43.14 a barrel this year, and rise to $54.50 in 2010, assuming the economy begins recovering. EIA said crude averaged $99.57 a barrel last year.
Diesel will average $2.28 a gallon this year, EIA predicted, and rise to $2.55 in 2010. Last year the average was $3.79. EIA is the Energy Department agency that performs the weekly diesel and gasoline surveys.
Ultra-low-sulfur distillate stocks, the basis of diesel fuel, remain well above levels from one and two years ago. EIA said the stockpile on Feb. 6 was 85.3 million barrels, up from 69.6 million in early February 2008 and 58.6 million in the same week of 2007.
In a regional breakdown, New England had the highest diesel prices, $2.576 on average, while the Gulf Coast and Midwest states had the lowest, $2.156 a gallon and $2.173, respectively.
Senior Reporter Rip Watson contributed to this story from Coral Gables, Fla., and Staff Reporter Dan Leone from Orlando, Fla.
