Little change in diesel price outlook
May 23, 2012
Oil prices have dropped considerably over the course of the last month, starting with a sharp drop at the very beginning of May. West Texas Intermediate Crude (WTIC) has actually fallen below $90/barrel, the first time since late last year. Taking a longer view, oil prices are well above the lows achieved in late 2008 but well below the highs from early 2008.
After jumping from $3.95 in February to $4.13 in March diesel prices remained elevated in April. Recently, prices have eased, falling just below $4/gal in the latest report. This is good news for truckers but don’t expect the current trend to continue much longer. We expect prices to remain near the $4 mark for the next month or two before rising slightly to $4.10 and stabilizing until we get into 2013.
On a percentage basis diesel prices were essentially unchanged from last month, but have been rapidly easing versus last year. Prices were up just 1.4% versus last year. Although further near-term declines are possible, the U.S. economy and truck market are both capable of healthy growth in 2012 at current price levels. That is good news for everyone.
Our near-term outlook moved slightly lower on the heels of the recent pricing trends in the market. Six months from now we expect to be right back to where we thought last month. The oil markets are behaving rationally at the moment and pricing should slowly start to tick up. If the stability in the markets continues for at least a little while then we can anticipate diesel pump prices staying near the $4-$4.10 range that we have in our forecast for 2012.
With prices dropping last year starting in May and our outlook for pricing staying stable at a relatively high level, we expect to see an increase in year-over-year gains during the late summer months. Look for gains to max out near 10% unless there is a dramatic surge in crude prices.
The scout’s motto holds ever true in effectively managing fuel costs. Pump prices have the knack of being quite volatile: whether it’s because of weather or crude oil prices or supply concerns or one of a hundred other reasons. Remember: fuel costs can quickly change. Be prepared.
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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