Monday, January 17, 2011

Trucking Industry Trends - Diesel Costs for 2011

Trucking industry trends for diesel costs show that the global demand for diesel is far higher than the demand for gasoline. What does this mean for transportation managers throughout the US? You can read the article and judge for yourself.

Diesel Premium to Remain in 2011, Analysts Predict
By Dan Leone, Staff Reporter - Transport Topics

U.S. retail diesel has sold at a premium over gasoline throughout 2010, and petroleum market watchers saidglobal competition for the trucking industry’s main fuel likely means that will not change any time soon.

“There’s really one reason” for the spread, said Tancred Lidderdale, a Department of Energy economist. “Theglobal demand for distillates is rising faster than global demand for gasoline.”

Last week, the U.S. retail diesel average was 23.9 cents higher than the gasoline average. The spread narrowedsignificantly from just one week earlier as gas rose far faster than diesel, DOE reported Dec. 6.

The highest diesel premium so far this year came on Nov. 29, when diesel was 30.6 cents a gallon moreexpensive than gasoline. The gap had not been so pronounced since February 2009, according to DOE data.

Decades ago, diesel was a refinery byproduct and reliably cheaper than gasoline. Each successive federal cap onsulfur content for diesel resulted in higher refiner costs that got passed down the line to truckers.

Now, DOE data show, retail diesel is almost always more expensive than gasoline.

However, when DOE began its weekly survey of filling stations in 1994, diesel and gas prices tracked one anotherquite closely. It was not until 1996 that DOE’s weekly survey reported diesel prices were routinely higher thangasoline. The last time the diesel average stayed below the gasoline average for more than two consecutiveweeks was during the summer of 2009. Diesel has not been cheaper than gas since August 2009.

So far in 2010, the average spread between DOE’s weekly diesel and gasoline average has been 20.7 cents agallon, about in line with the agency’s 2010 estimate of 21 cents a gallon.

The latest official DOE projection for the 2011 diesel premium is 23 cents a gallon.

Diesel is coveted both by developed nations and industrializing giants such as China.

“In Europe or China, the growth in diesel fuel consumption is stronger and is expected to stay stronger thangrowth in gasoline consumption,” Lidderdale said.

“We’ve become a net exporter to these countries,” said petroleum analyst Phil Flynn, referring like Lidderdale to Europe and China.

DOE reported that distillate fuel exports for the week ended Dec. 2 were 777,000 barrels a day. That figure isunchanged from the prior four weeks, but it is more than 327,000 barrels a day higher than in the week endedJune 4, the earliest period for which data were available.

Europe has more diesel cars than the U.S., and China’s economy is recovering from the recession so quickly that,according to the most recent DOE data, year-over-year growth in demand for oil in that country was close to, orequal to, U.S. demand growth in August and September.

In those months, DOE estimated that the U.S. petroleum market processed 750,000 and 900,000 barrels,respectively. That level of demand growth was “approaching, or even exceeding, growth levels seen in China,”DOE said.

Chief among the domestic factors that contribute to the diesel premium are the United States’ ultra-low-sulfurdiesel fuel requirement and rising demand for diesel from U.S. buyers.
“Ever since we’ve gone to ULSD, that has always added to the premium,” said Flynn.

For a link to the article, click here.