Diesel Prices Top $4 For First Time in 10 Weeks

In a notable spike, the national average diesel price has breached the $4 mark for the first time in 10 weeks, soaring by 21 cents to $4.109 per gallon, according to the latest data from the Energy Information Administration (EIA) for the week of Feb.12. This surge represents the most significant one-week increase since July 2023, echoing the challenges faced by the industry.

The recent surge is more than three times the combined gains of the two preceding weeks, totaling 6.1 cents. However, despite the current increase, a gallon of diesel is still 33.5 cents cheaper than at this time in 2023.

In the realm of gasoline prices, the average cost rose by 5.6 cents to $3.192 per gallon, marking a departure from the rising trend. Nevertheless, it remains 19.8 cents less than the prices observed a year ago.

Analysts attribute the recent uptick in fuel prices to refinery issues, with unplanned maintenance and downtime affecting refining capacity. A notable incident was a power outage at the BP oil refinery in Whiting, Ind., the largest in the Midwest, causing disruptions and potential prolonged offline status until March.

Tom Kloza, founder of the Oil Price Information Service, noted that despite relative quietness in the markets, refinery issues contributed to the recent price surge. Kloza highlighted the tightness in diesel fuel supply, cautioning that diesel prices may experience further spasms upwards.

Oil analyst Phil Flynn pointed out that refining capacity experienced a significant dip in early February, leading to tightened supplies and subsequent price increases. Refinery utilization dropped to 80.6%, down from 92.6% in January. Both Flynn and Kloza anticipate refining capacity to remain tight in the coming weeks, with refineries switching operations to produce less-polluting summer blend gasoline.

Despite the domestic oil production reaching nearly 13.5 million barrels per day, concerns arise regarding the Biden administration’s 2024-29 National Outer Continental Shelf Oil and Gas Leasing Program. Critics argue that it places excessive restrictions on exploration in the Gulf of Mexico, potentially affecting future energy needs and increasing reliance on foreign sources.

As fuel prices continue their upward trajectory, industry stakeholders remain watchful, anticipating how factors such as refining capacity, regulatory policies, and global market dynamics will shape the future of the energy landscape.

Source: Transport Topics