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October 5, 2020 6:00 PM, EDT

Diesel Drops to $2.387 for Fifth Consecutive Decline

Oil Industry Braces for Another Hurricane
Trucks getting diesel at a stationTruck fueling at a Petro truck stop off of Interstate 65 in Glendale, Ky. Trucking’s main fuel now costs 66 cents a gallon less than it did a year ago. (John Sommers II for Transport Topics)

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The average price of diesel dropped seven-tenths of a cent to $2.387 a gallon, declining for the fifth consecutive week, the Energy Information Administration reported Oct 5.

The national average price of gasoline nudged upward by three-tenths of a cent to $2.172.

On a national basis, trucking’s main fuel now costs 66 cents a gallon less than it did a year ago. The EIA said diesel declined in six of the 10 regions it surveys. It increased in two regions and remained flat in two.

The biggest drop came in the West Coast-less-California region, where diesel slid 2 cents per gallon to $2.534 per gallon, 68.1 cents cheaper than a year ago.

Diesel remained flat in the West Coast region, holding steady at $2.928, and in the East Coast region at $2.473 per gallon.

Diesel increased in two regions, the Lower Atlantic and California.

In the Lower Atlantic region, diesel increased five-tenths of a cent to $2.328 a gallon. In that region, diesel is 58.7 cents less expensive than a year ago.

In California, the price of diesel increased by the largest amount in the nation, jumping 1.6 cents per gallon to $3.252 a gallon. Diesel is 72.9 cents less expensive there than a year ago. As it has for several months, California continues to have the most expensive diesel in the nation.

The least expensive diesel remains in the Gulf Coast region, home to most of the nation’s oil and gasoline production and refining capacity, and substantially lower transportation costs. Diesel costs $2.141 a gallon in the most recent week of reporting, 1.3 cents a gallon less than last week. Diesel along the Gulf Coast is down 66.3 cents a gallon from last year’s level.

Meanwhile, another hurricane is looming in the Gulf of Mexico, causing energy industry workers who work offshore to once again abandon their rigs because of the risk.

At press time on Oct. 8, the National Hurricane Center and other forecasters are closely watching Hurricane Delta, which was churning in the Gulf of Mexico as a Category 2 hurricane. The hurricane center said Delta was likely to make landfall along the southwestern Louisiana shoreline on Oct. 9.

Delta was forecast to bring “life-threatening” storm surge and dangerous winds to Gulf Coast communities. As it pushes inland, flooding was the main concern as the storm was expected to drench areas far inland through the weekend.

According to the hurricane center, Delta would become the fifth hurricane to make landfall in the U.S. this year, the largest number since 2005. It also would become the 10th named storm to make landfall this year in the continental U.S. That’s the most in one year, passing 1916, which saw nine named storms.

The offshore Gulf of Mexico is home to roughly 1.9 million barrels per day of crude production capacity, according to EIA.

Louisiana is home to an estimated 3.37 million barrels per day of refining capacity. And some of those refineries are still not operating fully because of Hurricane Laura in August. Two refineries in the Lake Charles area are shut down because of power issues following Laura.

Oil industry analyst Phil Flynn told Transport Topics he believes this latest hurricane will add additional uncertainty to the oil markets.

“I’m tired of these storms. It’s been a historically bad year. There’s so much volatility and it’s right up in your face,” he said. “We have a chance to get up to $45 a barrel. It looks like we’re going up. I think we could be turning the corner.”

For the past several months the price of oil has remained in a narrow range, trading between $38 and $42 per barrel, in part due to very weak demand because of the drop in diesel and gasoline usage, caused by the COVID-19 pandemic.

“The big question comes back to a second wave of the virus,” he said. “It doesn’t seem like most of the economies around the world are looking at another shutdown. All of these things may give us a bit of a bounce.”

Meanwhile, the Baker Hughes weekly rig count, which monitors the number of active oil rigs in the U.S., Canada and internationally, showed the number of rigs in the U.S. increased by five in the last week to 266. However, that’s 589 fewer than a year ago. In Canada the rig count increased by four to 75, but that’s still 69 below a year ago. Internationally, the number of rigs declined by 45 to 702. That’s 429 fewer than at the same time one year ago.

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