By Jorge Pradilla, FUELSNews Editor
So we know that diesel prices remain at the top of the 5-year historical range. We also know that diesel prices have seen an increase in demand over the last few years, with most of it going to oilfield services and agriculture. Though refineries are operating at highly efficient rates, the increase in demand has been a contributor to higher diesel prices as infrastructure has not been able to keep up with domestic production, supply, and logistics. As a result, crude and refined products shipments have increased the use of truck and rail transportation, as pipelines have not been able to keep up with demand.
With that said, it is still very typical to hear someone say “back in my day, diesel prices weren’t even one dollar.” If you look at the graph below, it is true. Nominal on-highway diesel prices back in 1979 averaged 80 cents per gallon. However, if you really want to run an accurate historical analysis, you have to keep in mind the cost of living, which we tied to the Consumer Price Index (CPI). Once you add CPI to the picture, you can see that real diesel prices have ranged between a low of $1.36 and a high of $5.02 between 1979 and 2013, while the 34-year average was around the $2.47 per gallon. With diesel prices currently around $3.90 per gallon, we are on the upper part of the historical range. However, note the big spike in 2008 and the correction that followed in 2009. Furthermore, note how much the panorama has changed since. Diesel Prices have ranged between $3.90 and $4.08 over the last three years.
Though the EIA expects diesel prices to continue their downtrend through December 2014 (as infrastructure improves and new pipelines come onboard), it is hard to see diesel prices going back to the lows seen in the late 1990’s. So what else has affected diesel prices over this time period? In parts 2 and 3, we will discuss the changes in crude oil prices and their impact on diesel prices over this time period, as well as other contributing factors, like refiner margins and retail margins.
Jorge Pradilla is the head editor of FUELSNews 360°, and authors the FUELSNews daily e-newsletter. Born in Bogota, Colombia, Jorge holds a BS in Marketing from Piedmont College and an MBA in Managerial Leadership. Jorge Pradilla currently holds the position of Supply Risk Supervisor at Mansfield Oil Company, focusing on the company’s hedging portfolio, overseeing the contract reconciliation processes and conducting market analytic efforts.
