Unstable fuel prices on horizon, OPIS says

| 6/23/2003

Owner-operators and fleet owners have recently breathed a little easier thanks to a 30-cent per gallon drop in fuel prices from their record-setting highs this past March.

But some experts think companies who use a significant amount of fuel to run their business could be in for a rude awakening if they don't stay on top what's happening in the market, according to the Oil Price Information Service.

After a 13-week decline, on-highway diesel prices recently increased a penny, according to figures released June 16. The national average, at-the-pump diesel price rose from $1.422 to $1.432 a gallon, the Energy Information Administration reported.

The highest price in the nation was in California, at $1.651 a gallon.

According to this week's OPIS Fleet Fueling News (www.opisnet.com/fleets.asp), demand for gasoline is as high as it has ever been. Refineries are running at peak capacity and are unable to keep pace with the growing consumption. The saving grace has been the huge influx of imported finished gasoline that is streaming into East Coast ports. 

Even with the steady flow of imports, supply remains a huge concern. U.S. inventories of gasoline normally build from mid-May to mid-June. That hasn't happened this year, and there is no comfort zone for supply on the East or West coasts or in the Midwest. A single refinery problem could cause some very large regional price spikes, OPIS reported.

To make matters worse, OPEC is likely to cut crude oil production by 1 million barrels per day when the organization meets in just a couple of days. But even if there’s no significant increase in crude, prices at the pump are more likely to be affected by regional supply and demand rather than global politics.

Supply precarious

Diesel supply is precarious. Prices have slumped as they typically do in late spring, and the dip has been hastened by a sell-off in natural gas. But inventories are low across the United States, and refiners are maximizing gasoline output, possibly to the detriment of diesel production. There's some suggestion that current wholesale and retail low-sulfur diesel prices may be as low as we're likely to see in the next 90 days.

OPIS has been a publisher for U.S. retail, spot and wholesale petroleum prices for 27 years.