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Published June 22, 2023
In recent weeks, the national average diesel price has experienced a significant dip, falling 8.8 cents to settle at $4.366 a gallon, as reported by the Energy Information Administration on Nov. 6. This article will delve into the factors contributing to this sudden decline and its implications for various regions and industries.
Understanding the Numbers: Diesel's Volatile Journey
The average diesel price has witnessed a combined decrease of 17.9 cents a gallon over the past two weeks, countering the previous rise of 10.1 cents during the week of Oct. 23. Notably, a gallon of diesel now costs 96.7 cents less than it did at this time in 2022. In contrast, the average price for a gallon of gasoline slipped 7.7 cents to $3.396 in the most recent week, marking a 40-cent decrease from a year ago.
Regional Disparities: Peaks and Valleys
Diesel’s average price decline is evident across all 10 regions surveyed by the EIA, with the Rocky Mountain area experiencing the most significant drop at 16.1 cents a gallon. The Midwest and the West Coast (excluding California) also saw substantial declines at 10.7 cents and 10.4 cents, respectively. However, New England, facing ongoing supply constraints, exhibited the smallest decline at 1.4 cents.
Supply Constraints in New England: Irving Oil's Impact
The relatively firm tone in New England’s diesel prices can be attributed to ongoing supply constraints. Irving Oil’s 320,000 barrels-per-day Saint John refinery in New Brunswick, only back from a seven-week turnaround on Nov. 5, possibly played a role in this scenario. However, details on whether the refinery resumed operations on schedule remain unclear.
Analysts predict near-term retail price weakness, as wholesale crude and diesel prices plummeted on Nov. 6 and 7. These declines are linked to Chinese transportation fuel price cuts and concerns about demand in both China and the U.S., according to Price Futures Group oil trader Phil Flynn.
Market Predictions: What Lies Ahead?
Retail prices began the fourth quarter of 2023 averaging $4.593 a gallon, but recent trends indicate a likelihood of continued decreases. The EIA’s Short-Term Energy Outlook, released on Nov. 7, forecasts retail diesel prices averaging $4.46 per gallon in the final three months of the year, a slight decrease from the $4.57 per gallon predicted a month earlier.
Industry-Specific Influences: Shipping Seasons and Demand Patterns
The end of peak shipping and harvest seasons in the Midwest has led to a decline in overall demand for diesel. However, a unique pattern emerges in the Pacific Northwest, where Christmas tree shipping season began on Nov. 4. This aligns with the peak season for fall produce, including potatoes, onions, pears, and apples. Reefer truck rates have seen a significant weekly increase, indicating a surge in demand for refrigerated transport.
In conclusion, the recent fluctuations in diesel prices paint a complex picture influenced by regional dynamics, global market trends, and industry-specific factors. As we navigate this landscape, it becomes crucial for businesses and consumers alike to stay abreast of these changes, considering the potential impact on various sectors.
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