Posted in: Default,
by Patrick DeHaan on Sep 9, 2009 12:08 PM
With winter coming and many curious about diesel prices, I thought I'd share my predictions with you!
First of all, understand that diesel fuel and heating oil both are a type of distillate fuel (heavier oil). When winter rolls around, demand of distillate fuel rises while demand for gasoline falls. When spring arrives, distillate fuel demand falls while gasoline demand rises.
Basically, the peak season for gasoline is summer and distillate's peak season is the winter. During the "off season" of both, prices fall and typically are more stable.
With oil prices much lower than last year, many heating oil distributors have yet to purchase their supply for this season, hoping prices fall further. What this means is that demand (and thus prices) have not yet risen. We'll start to see prices for distillate fuels (heating oil and diesel fuel) rise as demand rises and distributors start to buy to supply their customers.
It is important to note that distillate stockpiles are up over 23% compared to last year, keeping a "ceiling" on how high diesel prices rise in the near future.
Currently, diesel prices are averaging around $2.66/gallon compared to a whopping $4.20/gallon last year. Diesel prices have remained relatively steady this summer, and that stability will last until mid-October. Average diesel prices will stay between $2.60-$2.77 until October when prices will rise to $2.67-$2.95 for late October through January.
If the Northeast has a very cold winter, expect prices to be seven to nineteen cents higher than the above numbers. All said, diesel prices should remain between $2.50 and $3 until winter is over. Down the road, be prepared for what may come. Winter 10/11 may be a much different story as the economy continues to grow and worldwide demand rises.