U.S. diesel prices not likely to hit 2008 numbers, analysts say

By David Tanner, Land Line associate editor | Friday, February 24, 2012

Diesel prices in the U.S. aren’t likely to hit the all-time highs seen in 2008, according to market analysts. The global price of crude oil, however, continues to inch upward and could hit a historic high if conditions persist.

ProMiles reported the national average for diesel fuel at $4.01 on Friday, Feb. 24, following a gain of 2.2 cents overnight. The last time diesel averaged above $4 was April and May of 2011.

Fuel prices have inched upward in the past few weeks, and some have speculated that they could keep going and get close to the historic $5 highs seen in 2008.

Tom Kloza, chief analyst for the Oil Price Information Service, says the upward pressure on diesel fuel has more to do with global demand than it does speculation or the oil markets.

“I think there’s a better chance that diesel would hit $5 than gasoline would hit $5 but I think it would be an excessive price,” Kloza told “Land Line Now” on Sirius XM.

“You may see, at some point in 2012, diesel prices on the edges of the country – the Pacific Northwest, California, maybe New England – flirt with a $5 price. But no, I think that’s probably hyperbole for the most part.”

Kloza believes diesel will stay below 2008’s historic highs, which put the nation into recession.

“I don’t think we’ll get that close this time because, in retrospect, people will realize that those were economy killers,” he said.

The U.S. Energy Information Administration also does not anticipate fuel prices reaching historic highs this year. In the February edition of the Short-Term Energy Outlook, EIA analysts estimate the diesel average at $3.91 and the gasoline average at $3.53 for the year. With any forecast, the estimates are subject to change.

Crude oil was just shy of $110 per barrel on Friday in New York, but the global market tells a different story as crude is averaging $120 to $127 a barrel.

The highest price for crude domestically was $147 a barrel back in July of 2008.

Kloza says whereas speculation is not playing a role in diesel prices, it is playing a role in the upward pressure on oil.

“Speculation is actually really responsible on the gasoline side and very responsible on the crude oil side. There’s not a lot of speculation in distillate – heating oil or diesel right now,” he said.

If oil or fuel were somehow to approach the record highs of 2008, history dictates that the economy would not fare well.

“The last time we got up to these numbers worldwide, the last time we spent any time at these numbers worldwide, the consequences were a deep, deep recession,” Kloza said.

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