This Editorial appears in the Sept. 9 print edition of Transport Topics. Click here to subscribe today.
Not so long ago, the primary concern we had about fuel prices each year as the leaves in many parts of the nation began to change was that refineries would divert some of their processing capacity to home heating oil production.
And this competition for the raw stock that produces both diesel and home heating oil would inevitably push diesel prices higher, just as the end of the peak summer driving season occurred.
Refiners, of course, often cite the increase in summer gasoline demand to meet consumers’ needs as the reason why diesel prices don’t fall as much as they should when demand slackens since there’s not a lot of home heating oil purchased all summer. And that’s because, they say, the gasoline demand leads to refiners focusing on it, at the expense of diesel production.
These days, we’re not hearing much about home heating oil, although winter is surely coming. But that hasn’t turned into any kind of gain for the nation’s trucking companies.
Rather, diesel prices are beginning what could be a serious upward spiral. Today, however, the culprit being cited isn’t heating oil competition — it’s U.S. foreign policy, specifically the Mideast tensions being raised by U.S. threats to take military action against the Syrian regime for having used nerve gas to kill civilians.
Military action could lead to a slowdown in petroleum exports from the region, experts say, which could trigger a notable spike in prices.
Such concerns last week led to the largest spike in the U.S. retail diesel price average since February. The 6.8-cent bump moved the average to $3.981 a gallon, the highest it’s been in five months. And that’s before anything concrete has taken place in terms of U.S. military action.
The chief economist of the Oil Price Information Service, Tom Kloza, warned last week that a $4-a-gallon average is likely to be reached “this month, with the high price of crude oil.”
The domestic price situation is exacerbated by the record amounts of diesel that U.S. refiners are exporting to customers, taking advantage of the additional profits available overseas for the fuel.
Kloza said that U.S. diesel exports, which hit a record 1.2 million barrels a day in June, could go even higher in coming months.
In all, he warned, this could be a “scary September” for truckers in terms of diesel price increases.
So, get ready.
