Diesel prices still trending down, stable in 2012
September 21, 2011
Diesel prices have been trending down since peaking at $4.12 during the first week of May. Recently, U.S. prices inched up less than 5 cents after Hurricane Irene and have started on their downward path again, settling at $3.83 last week.
Since the pricing peak in late spring we have been pointing to a sustained drop in pricing, with relatively stable pricing until late in 2012. We still maintain that thesis with additional declines later this year as the very weak global economy continues to weigh on demand. Supply and Demand fundamentals don’t point to strong growth, or extreme volatility, in oil pricing until late 2012 or 2013 – once global demand has had time to heat back up. We continue to point out the obvious that politics is a wild card. Despite that, the fundamentals for a more stable pricing environment remain intact.
So far the transition in Libya has gone smoothly, but it is still very early in the process. That is good news for many reasons, but, unfortunately, it is unlikely to have a major impact on oil prices. It will be some time before Libya is back to operational and it was never a major exporter of oil. The bigger beast continues to be Syria. It does not look like there is much of an appetite for foreign intervention, yet. That could swiftly change if the regime continues its current strategy. If a major intervention happened there then we would most likely see some near-term upward swings in oil prices. Keep an eye on that.
As noted above, diesel prices are currently at $3.83 (as of 09/19/2011). Prices are well below the May peak but are still more than 30% higher than last year. The year-over-year impact will subside through the beginning of 2012 and then we would anticipate a fairly neutral environment until late 2012 at the earliest, and probably not until 2013. The price of oil has been holding steady, below the $90 mark.
Our outlook anticipates pump prices getting down to $3.75 during Q4 and then bumping up slightly once we get into 2012 to $3.90/gal. We don’t see prices rising substantially until late 2012.
About Our Fuel Outlook:
We are not fuel experts. Nor do we desire to be. But, fuel is first or second in your costs categories. You have to be prepared for swings in this category. Use these numbers as a rational basis for understanding where fuel costs are headed, knowing that even relatively little problems can create quite large (short-term) fluctuations in the oil markets.
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