U.S. retail diesel fuel prices have sold at a premium over gas throughout 2010, and petroleum market watchers said global competition for the fleet companies main fueling likely means that will not change any time soon not matter what mode your buying fuel cards, mobile fueling, fleet cards in your fuel management.
“There’s really one reason” for the spread, said Tancred Lidderdale, a Department of Energy economist. “The global demand for distillates fleet fueling is rising faster than global demand for gas prices.”
Last week, the U.S. retail diesel fuel prices average was 23.9 cents higher than the gas price average. The spread narrowed significantly from just one week earlier as gas rose far faster than diesel fuel prices, DOE reported.
The highest diesel fuel prices premium so far this year came on Nov. 29, when diesel fuel prices were 30.6 cents a gallon more expensive than gas prices. Decades ago, diesel fuel prices were a refinery byproduct and reliably much cheaper than gas. Each successive federal cap on sulfur content for diesel fuel prices resulted in higher refiner, fuel companies costs that got passed down the line to fleet companies causing fleet managers headaches.
Now, DOE data show, retail diesel fuel prices is almost always more expensive than gas. Mobile fueling cost for fleet fueling is also higher.
However, when DOE began its weekly survey of filling stations in 1994, diesel fuel prices and gas prices tracked one another quite closely. It was not until 1996 that DOE’s weekly survey reported diesel fuel prices were routinely higher than gasoline. The last time the diesel fuel prices average stayed below the gasoline average for more than two consecutive weeks was during the summer of 2009. Diesel fuel has not been cheaper than gas since August 2009 and might not be again since it is really the worlds fueling and not just the fleet fueling that it is used for in the U.S. Running fleet companies on their fuel cards for fleet fueling usually offers considerable fuel savings.
So far in 2010, the average spread between DOE’s weekly diesel fuel prices and gas average has been 20.7 cents a gallon, about in line with the agency’s 2010 estimate of 21 cents a gallon so there is a lot of fuel saving if you are buying gas.
The latest official DOE projection for the 2011 diesel premium is 23 cents a gallon.
Diesel is coveted both by developed nations and industrializing giants such as China. Imagine being a fleet manager in China and what your fuel management or fleet management program must look like to achieve fuel savings.
“In Europe or China, the growth in diesel fuel consumption is stronger and is expected to stay stronger than growth in gasoline consumption,” Lidderdale said.
DOE reported that distillate fueling exports for the week ended Dec. 2 were 777,000 barrels a day. That figure is unchanged from the prior four weeks, but it is more than 327,000 barrels a day higher fleet fueling than in the week ended June 4, the earliest period for which data were available.
Europe has more diesel cars than the U.S., and China’s economy is recovering from the recession so quickly that, according to the most recent DOE data, year-over-year growth in demand for oil in that country was close to, or equal to, U.S. demand growth in August and September. Imagine being a fleet manager in China overlooking your fuel management or fleet management solutions. Everyday your fleet companies business is growing like crazy. We don’t know what kind of fuel cards they use or if they have little mobile fueling trucks going around fleet fueling but it must be interesting.
In those months, DOE estimated that the U.S. petroleum market processed 750,000 and 900,000 barrels, respectively. That level of demand growth was “approaching, or even exceeding, growth levels seen in China,” DOE said.Chief among the domestic factors that contribute to the diesel premium are the United States’ ultra-low-sulfur diesel fuel requirement and rising demand for diesel fuel pricesfrom U.S. buyers.“Ever since we’ve gone to ULSD, that has always added to the premium,” said Flynn. Diesel fuel prices will continue to lead the way over gas prices. That is important to know if you want to achieve fuel savings. As fleet fueling prices raise so will mobile fueling, fuel card, fleet cards, fuel companies will look for over increases to offset their increase in diesel fuel prices for deliveries.
A solid fuel management system with a fuel management team will help to ensure your fleet companies operations are doing things right.