Decline in DOE/EIA diesel price is largest in 4 months

The Department of Energy/Energy Information Administration average weekly retail price declined 0.8 cents a gallon Monday, the biggest drop since April.

The downward move comes as commodity diesel prices moved up and down last week and into Monday, declining sharply a week ago and rising over the next three days before falling again to largely end up back where they were a week ago.

Monday’s decline in the DOE/EIA price put the benchmark number for fuel surcharges at $3.356 a gallon. The decline is the largest since a 1.5-cent decline on April 12. Since then, the price has been up or flat 14 of the past 18 weeks, though with declines recorded in three of the past four weeks. 

Oil prices on commodity markets continue to be impacted by concerns about a loss of demand from the COVID delta variant. In particular, reports out of China Monday that said the country’s independent refiners have cut back processing on a variety of factors, including a concern about demand, weighed on the market Monday as it declined again. 

With the slide in prices Monday, the ultra low sulfur diesel price on CME stood at $2.0483 a gallon at the day’s settlement. That number isn’t that far off from where ULSD prices stood last Monday, when the market settled at $2.0421 a gallon. The ups and downs of the prior week resulted in a Monday-to-Monday gain of 0.62 cents, though the decline between Friday and Monday clocked in at 2.96 cents a gallon. 

Although the DOE/EIA diesel price has been down three of the past four weeks, it is actually up 1.2 cents from where it was before the recent mostly declines began, given that the one week it was up — Aug. 2 — marked a 2.5-cent increase, which more than cancels out the other three declines. 

Commodity diesel prices as measured by the CME ULSD price are significantly lower than their recent highs. The first-month settlement on the first trading day of August was $2.1994 a gallon, a 15.11-cent decline between that Aug. 2 settlement and that of Monday. Wholesale prices in the ULSDR.USA feed are down 11 cents during that time. But as this week’s DOE price reflects, retail levels have not yet moved anywhere near that amount. 

However, retail diesel prices are starting to come more in line with its usual spread against the  price of wholesale diesel, as measured by the FUELS.USA data stream in SONAR. That spread between retail and wholesale diesel opened August at slightly more than 91 cents but has recently been seen at about $1.03 a gallon, which is more in line with historic norms. The 12-cent increase in that spread is the numeric reflection of why even as commodity and wholesale diesel have been falling significantly, the price of retail diesel has slid only a small amount. 

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