Editorial: Ol’ Man Winter Arrives

The first blast of winter has arrived, bringing with it an unwelcome gift beyond frost-covered windshields — namely, higher fuel prices.

Federal statistics show that the average price of diesel fuel at retail pumps around the nation last week reached almost $1.63 a gallon, 2.4 cents higher than the week before.

Analysts said colder weather in the Northeast led to the higher prices by focusing attention on the low level of distillate inventories. Industry statistics show that stocks of heating oil fell 500,000 barrels last week and are now 55% below last year, which is bad news for diesel, a nearly identical product.

Traders are betting that the cold weather in much of the nation in recent weeks will put another dent in the already low cupboard, pushing fuel prices still higher.

Even as the diesel average fell 7 cents over the previous four weeks, oil futures continued to climb, as traders anticipated higher prices later in the season. And now these predictions are starting to come true.

Add to this mix statements from the oil-producing cartel that its members planned no increases in their oil production and the situation looks even worse. On Nov. 20, crude oil prices climbed to $35.48 a barrel in New York.

Analysts are beginning to worry that the Northeast may soon see a repeat of last year’s fiasco when a sudden cold snap helped propel diesel prices above $2 a gallon as No. 2 fuel was shifted to fill home heating oil tanks.

The cold snap froze rivers in the region and made it even more difficult to replenish inventories.

We are now in an even more precarious position, since refiners let distillate inventories fall well below customary levels this summer, as a shortage of crude and higher margins on gasoline encouraged them not to build up heating oil and distillate stocks.

Refiners now report they are going full tilt but are unable to catch up to demand, let alone produce enough distillate to replenish inventories, which might well help nudge prices downward.

Spring certainly seems a long way off.