By Jorge Pradilla, FUELSNews Editor
If you recall the first article of the Historical Diesel Price Series, we discussed the changes in diesel prices over the last 3 decades, taking consumer prices into consideration to ensure accuracy. We found that diesel prices have increased over the last few years, mainly due to change in the supply and infrastructure picture, the 2008 economic recession, and the increase in demand for distillates over the recent years. To continue with that analysis, it is important to describe the relationship between diesel fuel and crude oil.
As you know, diesel fuel is just one of the many products derived from the refining of crude oil, thus the strong correlation between crude oil and diesel fuel prices. On the chart below, we divided the price of crude oil by 42 (the amount of gallons that a barrel of crude oil holds) in order to better reflect the correlation of crude oil and diesel fuel on a gallon equivalent basis. As crude oil prices have changed dramatically over time (mainly due to geopolitical or economic conflicts lately), we can see that diesel prices have been receptive throughout time, reacting quickly to any drastic changes in crude oil and adapting to the situation. The reality is that we live in a global market, and any drastic change or catastrophic event, whether it is economic, geopolitical, or weather related, will make an impact on crude oil prices.
If you think about it, petroleum is a commodity that has strong global demand and is imperative for the world to run. It is humanity’s primary energy source, and powers multiple industries throughout the world. So next time you see a sharp move in diesel prices and wonder why prices are changing so quickly, consider the local and international picture, as there is a high chance that there could be a supply issue, or perhaps a macro event that has made its mark on crude oil prices. On the next and final edition, we will dive into other specific factors that affect diesel fuel prices, including refiner and retail margins, so we can better assess all the components that make the final diesel price. 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.
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.
