Diesel lowest in years; prices slower to react in Canada

WASHINGTON — The national average of diesel fuel in the U.S. continued to fall last week even as crude oil futures hit a four-year low.

The average price of diesel fell 10 cents from a week ago to $2.515, according to the Energy Information Administration. That’s 81 cents less than it was a year ago and down over $2 per gallon from its summer highs.

Crude oil prices rose 7 percent Monday after dropping to around $40 a barrel last week for the first time in four years. Analysts say prices were up because of expectations that the OPEC oil cartel may deliver a substantial cut in production, as well as a pledge by President-elect Barack Obama’s to put massive investment into infrastructure to revive the economy.

Tom Kloza, chief oil analyst for the Oil Price Information Service, says that there’s still momentum for prices to move lower since diesel wholesale prices are still about $18 a barrel more than the price of crude.

The refining profit margin for diesel continues to
be nearly 20 percent higher than gasoline.

"I think with diesel you could make the case … that perhaps it is selling for 25 or 50 cents higher than it might be if people start realizing it’s not just gasoline demand that’s in a tailspin; U.S. and global diesel demand is down as well," Kloza says.

In Canada and other parts of the world though, it seems that diesel prices are slower to react. The average price of diesel is still over 20 cents a liter higher than gasoline (about $102 a liter compared to 80 cents for gas) because the refining margin continues to be much wider for diesel than its consumer counterpart.

Southern Alberta and Southern Ontario currently have the lowest averages prices (between 95 cents and $1.00 a liter), while Atlantic Canada and parts of northern Quebec can see pump prices as high as $1.10, which is still about 50 cents lower than prices last July.

In general, both gas and diesel are on average about 30 cents higher north of the border.

Petroleum analysts cite higher Canadian taxes and recent changes in the exchange rate between U.S. and Canadian currencies for the discrepancy.

 

 


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