Editorial: A Fuel-Price Gusher

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A funny thing happened just as some fleets were discussing reducing their fuel surcharges: Prices went flying again.The Jan. 26 survey of filling stations put the average retail price of diesel fuel at $2.413 a gallon, the lowest level since Aug. 8, 2005, just before Hurricane Katrina sent prices spiraling.Since that time, after five straight weekly increases, the average retail price of diesel is now $2.626, the highest level since Sept. 18 and 21.3 cents above the Jan. 26 level. And gasoline has jumped even more, with the national average up 34 cents over those same five weeks, to $2.505.And there appears to be no relief in sight.Worldwide diesel demand now is so high that it is disrupting traditional refining schedules and pushing prices even higher.Normally, refiners would be turning their attentions to gasoline to prepare for the summer season when customers take to the highways. Refiners usually shut down some distillate lines as the home-heating-oil season ends, and diesel prices usually fall as heating-oil demand declines. Diesel and heating oil are virtually identical products.But, as a Department of Energy analyst explained last week, “the growing demand for diesel [around the world] is outpacing the growth in gasoline, which is forcing up prices.”That demand is allowing producers to keep prices high. And those high prices are encouraging refiners to make more diesel, which could bode poorly for gasoline prices this summer.The DOE analyst said some refiners are keeping their diesel lines open, or are reopening them, to meet the high demand.Increased diesel use in Europe also is affecting the U.S. market, according to analysts. Increasingly, European automobile drivers are choosing diesel engines, which has erased surpluses that were traditionally shipped to U.S. markets and helped keep prices down, they said.DOE, in its latest short-term energy outlook, last week said the diesel average was likely to be between $2.684 and $2.715 a gallon this summer.And since oil has risen about $4 a barrel since the middle of February, it’s likely that more price increases are in store in coming weeks. Thus, surcharges are likely to be with us for some time to come.This editorial appears in the March 12 print edition of Transport Topics. Subscribe today.

 

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