Diesel price outlook lower for 2012
June 21, 2012
Prices have fallen significantly in the near-term. We don’t expect that to last too long, but enjoy the summer driving season this year. The supply and demand fundamentals are not indicating that a prolonged downshift in prices should be occurring. Global economic worries are obviously impacting the current environment. In time those worries will either be realized or reduced. Our inclination is to go with the latter. That leads to a return of modestly higher prices – likely back towards the levels that we had during 2011, not early 2012.
May pricing came in modestly below our expectations, but the trend has been moving fast downward and June is looking to come in significantly lower than we expected last month. Diesel prices in May fell 3.3% compared to April and were down 1.7% versus the prior year. This is the first year-over-year decline since at least 2010. They stood at $3.98 in May and are expected to drop to $3.76 in June. This would equate to a nearly 5% drop from last year.
We expect to see pricing pressures move slowly back upwards during the rest of 2012 and get back to the $4+ mark during early 2013. That keeps year-over-year gains relatively flat for the balance of 2012. Global economic and political shocks will always keep the oil markets volatile but the overall supply and demand fundamentals point to diesel prices near the $4 mark in 2013.
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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