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Yahoo
3 days ago
- Business
- Yahoo
Retail diesel benchmark price resumes downward momentum
Retail diesel prices declined last week, according to the benchmark number published by the federal government, picking up on a downward trend that had taken a break the prior week. The Department of Energy/Energy Information Administration average weekly retail diesel price fell 4.9 cents a gallon to $3.487, a drop of 4.9 cents. It follows a 6 cents per gallon increase for the weekly price posted a week ago. With the latest decline, it resumes a downward trend that had seen the benchmark used for most fuel surcharges fall five consecutive a recent high of $3.715 a gallon on Jan. 20, the price is now down 22.8 cents. Ultra low sulfur diesel on the CME has dropped sharply the past two weeks. On May 14, it settled at $2.2061 a gallon. The settlement Tuesday was $2.0794, a decline of 12.67 cents. Oil markets rebounded Wednesday, with ULSD settling at $2.0881 a gallon. That fall between May 14 and Tuesday was 5.7%. But Brent crude, the world benchmark, declined only 3% during that time. In his weekly commentary, energy economist Philip Verleger, who has always viewed diesel as a leading indicator of not just oil markets but of economic activity, says data coming out of the diesel market is pointing toward a slowdown in economic a headline that referred to data on distillate consumption – diesel is a distillate and makes up about 90% of the EIA data under distillate – Verleger writes that the numbers are the 'canary in the coal mine.' He said weekly data on U.S. distillate consumption through the week ending May 16 showed a 600,000-barrel-per-day decline from a mid-February peak, which he says is extremely large by historical standards. Verleger found a similar, disquieting decline: the period between August and November 2008, as the Great Recession was tightening its grip on the U.S. He said some of the decline could be because earlier numbers were skewed by imports being pulled forward due to avoidance of potential tariffs. But it is not just that, according to Verleger. It also reflects 'the ongoing reduction in investment activity that is not yet reflected in forecasts.' Citing the 2008 data, Verleger said, 'the drop in distillate use corresponded to the decline in real GDP.' 'Thus, we suspect the current drop in use, particularly since the beginning of March, warns of a slowdown in investment that will be reported later in 2025 and in 2026,' he wrote in the report. 'This decrease will also feed back into the GDP calculations.' Oil markets in recent weeks have been reacting not just to macroeconomic concerns driven by tariff uncertainty. They also are moving lower on the determination by OPEC+ to unwind its organization's production cutbacks, with more than 400,000 barrels per day scheduled to come back online in June. Additionally, OPEC+ ministers are scheduled to meet virtually this weekend and affirm another increase of that magnitude to go into effect in articles by John Kingston BMO's Q2 earnings show no improvement in credit conditions for trucking Double whammy for Wabash: 2 key agencies cut debt rating on trailer builder Despite red ink at Heartland, Morgan Stanley report relatively upbeat The post Retail diesel benchmark price resumes downward momentum appeared first on FreightWaves.
Yahoo
12-03-2025
- Business
- Yahoo
Benchmark diesel down over 11 cents in 2 weeks; refineries at risk?
Against a backdrop of falling asset prices virtually across the board, the benchmark diesel price used for most fuel surcharges fell for the second week in a row. The weekly average retail diesel price posted by the Department of Energy/Energy Information Administration declined 5.3 cents a gallon to $3.582. Combined with last week's drop of 6.2 cents a gallon, the price is now down 11.5 cents in just two weeks. It's the biggest two-week decline since a Dec. 16-23, 2023, drop. It also puts the price just above the lowest level of the year, recorded on Jan. 6, of $3.561 a gallon. With recession fears roiling Wall Street as the most visible sign of market worries, a commodity like oil, tied to economic activity, took a hit as well. The settlement Monday on the ultra low sulfur diesel contract on the CME commodity exchange was $2.1799 a gallon. It's the lowest ULSD settlement since Dec. 6, when the market settled at $2.1326. The price was down 3.61 cents a gallon for the day, a decline of 1.63%. With the drop Monday, the price of ULSD is down 10.73 cents in just a week. Since a recent high settlement of $2.5034 a gallon on Feb. 20, it's down 32.35 cents, suggesting retail prices still have a ways to go to catch up. From the perspective of diesel buyers, the decline is nothing but good news across the board. For trucking companies, diesel costs are generally the second-largest cost of doing business after labor, though companies with robust fuel surcharge programs can push them down to shippers to varying degrees. But another prospect was raised in a report Monday: that U.S. tariffs on imports in general and energy in particular might bring about retaliation. And for a U.S. refining industry that has become increasingly dependent on the export market for its success, that could result in long-term damage if not outright loss of capacity. That was the argument put forth Monday by longtime energy economist Philip Verleger in his weekly report, 'Notes at the Margin.' In December, the latest month for which data is available, U.S. refiners exported about 3.7 million barrels a day of all finished petroleum products. A little more than 1 million barrels a day was finished motor gasoline. ULSD was about 1.3 million barrels a day. Making a comparison to a ban on soybean exports by President Richard Nixon in 1973 in an effort to slow the price of food inflation in the U.S., Verleger said farmers today are still suffering from lost markets to growth in Brazilian soybean production that occurred as a result of the Nixon ban. It may have cost farmers as much as a trillion dollars since then, he added. 'US Gulf Coast oil refiners may suffer a similar hurt if President Trump maintains his aggressive tariffs,' Verleger wrote. 'Reprisals by their best foreign customers could leave them begging as refiners in the Persian Gulf, Russia, and now China seize their markets.' The U.S. Gulf Coast market has lost a significant refinery in recent weeks, as the LyondellBasel refinery closed. It was believed to be the oldest Gulf Coast refinery. Verleger cited two recent reports by the energy consulting firm of Wood Mackenzie which came out before the tariff wars, saying that more than 20% of existing world refineries were at risk to be closed as new refineries worldwide open for business in the Middle East and Africa. Those reports did not see U.S. refineries as vulnerable, according to Verleger. A new refinery in Nigeria, Dangote, has been described as 'colossal' and is a direct competitor with U.S. refineries in the Atlantic basin. But the Trump administration tariffs 'may change that because the refiners located on what has been known for more than a century as the Gulf of Mexico rely heavily on product exports,' Verleger wrote. 'These facilities may fall victim to retaliatory tariffs on those products.' U.S. product exports are an economic strength, Verleger argues. They 'comprise an arrow in the Trump administration's energy dominance quiver,' he said in the report. But there's a downside: 'They are also highly vulnerable because their key importers, Mexico and Europe, have governments preparing to retaliate against US tariffs,' Verleger said. But like other projections that the East Coast might see a spike in product prices as a result of tariffs on Canadian energy imports, slated to be 10%, Verleger said the small U.S. East Coast refining sector might benefit from a trade war. Verleger identified three significant East Coast refineries as examples of facilities that could benefit: the Bayway refinery in New Jersey, operated by Phillips66 (NYSE: PSX); the Delaware City, Delaware, refinery operated by PBF (NYSE: PBF); and the Monroe Energy refinery near Philadelphia, owned by Delta Airlines (NYSE: DAL). The EIA lists eight refineries in total in the East Coast region known as PADD1. 'The region relies on importing products from Canada, Europe, and the Gulf Coast,' Verleger wrote. 'Product prices there will rise with tariffs as the pipeline capacity from the Gulf is limited. This will allow the eight PADD I refineries to realize higher margins.' Ironically, even though fears have been raised that tariffs may have their first upward push on petroleum prices in New England and the U.S. Northeast, the region saw a smaller decline this week than the national average in the DOE/EIA report. But the tariffs are not in place yet. The average diesel price in New England was $4.037 a gallon, down 0.6 cents. For the East Coast as a whole, it was down 5.3 cents a gallon, to $3.742. More articles by John Kingston Downward drift in truck transportation employment continued in February New York City wants wider use of WIM technology to fight overweight trucks KAL Freight on its last legs: Will drivers be stranded if it closes quickly? The post Benchmark diesel down over 11 cents in 2 weeks; refineries at risk? appeared first on FreightWaves. Sign in to access your portfolio
