First time in two years gas is hot, diesel’s not

TORONTO — Not that there’s many upsides to an economic downturn, but it seems the North American trucking slump is directly resulting in falling diesel prices — so much so, that diesel costs at the pump are expected to fall below gasoline for the first time since 2007.

According to this Reuters article, the price gap between unleaded gas and diesel could close by this summer due to continually weak manufacturing and related transport service demand around the world.

Diesel costs, closely related to heating oil, have been propped up in Canada and the northeast U.S. up because of a traditionally chilly winter season, but that’s expected to change as summer approaches and gasoline use rises.

Flip Side: Sure freight volumes stink, but
at least those empty miles don’t cost as much

As freight volumes tighten and energy requirements falls, distillate refiners that ramped up capacity to meet booming shipping demand between China, Europe, and North America a few years ago, are left with surplus stock, one analyst comments.

Diesel consumption so far this year is at negative 3.7 percent (leading to a 10 percent jump in inventory) compared to gasoline’s negative 0.5 percent.

So, while traditional linehaul lanes are dry, those empty miles won’t cost as much as it did for much of 2008.

This week, U.S. Energy Information Administration forecasted that on-highway diesel prices are expected to average $2.28 per gallon this year and $2.55 in 2010 — about half of what prices were in July 2008.

U.S. real gross domestic product is expected to decline by 2.7 percent in 2009, triggering decreases in domestic energy consumption for all major fuels, the EIA reported. Economic recovery is projected to begin in 2010, with 2.2 percent year-over-year growth in GDP.

The worsening global economy and a weak oil consumption outlook are keeping the world oil market well supplied, EIA says, as world oil consumption is projected to fall by 1.2 million barrels per day this year.

 


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