Image: Jeffery Turner
While gasoline consumers may be jumping for joy or pumping with glee at falling gasoline prices, diesel consumers are being left out of the party, wanting in. Unfortunately, there's not much relief for diesel consumers in the months ahead.
Unlike gasoline, distillate (heating oil and diesel) peak consumption season is in the winter. Why is this, you ask? Distillate fuel can yield both diesel and heating oil because diesel and heating oil are very similar heavier oils. The problem here is that the Northeastern United States still consumes gobs of heating oil during the cold months, not natural gas. That means that peak consumption for distillate fuels during these months, keeping pressure on prices.
It certainly doesn't help that inventories of distillates are very low. According to the last Energy Information Administration report, distillate inventories are nearly 21% lower than they were a year ago. They've remained low for quite some time, likely due to the near record level of distillate exports. Every day, over one million barrels of distillate fuels are exported. That's over 42 million gallons that we could certainly use here in this country to build inventories back to healthy levels.
In fact, since the EIA started tracking distillate exports in June 2010, exports have come close to tripling, rising from 450,000b/d in June 2010 to 1.12mb/day this past March. Last year at this time, exports were 800,000b/d, or some 200,000b/d lower than where they currently stand. The problem here is that residents that consume heating oil are starting to fill their tanks in preparation for the winter months, meaning demand is reaching its yearly peak.
The news isn't all negative- while diesel prices will remain well above gasoline, there may be limited relief in the weeks ahead. We're not talking much, maybe 10-20c/gal at most, so don't get your hopes up. I expect diesel prices to remain higher than gasoline throughout the winter months as long as inventories remain tight, which doesn't look to change anytime soon. Diesel consumers sadly will keep looking at the party at the gas pump, knowing that there's not much to look forward to at the diesel pump.