Do You Know Where Your Diesel Fuel Prices Are Going

What is going on with diesel fuel prices? Let me try and give you my 2 cents but please don’t shoot the messenger.

I am sure you have all been reading or hearing about the price of crude oil on its way to $100 and above and diesel fuel and gas prices headed to over $4 a gallon. We hear the same things and honesty don’t know where the price of fuel will go.

Following the crude oil market everyday and trying to determine which way it is going to go, is like picking a stock like Apple (AAPL) that traded on January 29, 2010 at $190.25 and closed the year at $330.20. Great deal if you picked it, but connecting the dots backwards is always easier than connecting them forward.

Here is our view and I will be the first one to tell you that it has changed over the past 2 months. We always believe that the DOE forecast is usually conservative in how high they think fuel prices will go. It was just November 9, 2010 the DOE said national gas prices would be $2.84 and diesel fuel prices would be $3.09. When that report came out national gas prices were $2.832 and national diesel fuel prices were $3.116 so they must have figured prices were going to go down to meet their winter projections. The national price for gas last week was $3.052 and diesel fuel was $3.331. They still might be right. The market could crash but I don’t think it will.

Listen or read the Wall Street Journal, CNBC, Fox Business it doesn’t matter they all talk about $100 crude oil. There is almost an excitement about it. Why I don’t know. I don’t like paying anymore for gas in my car than you do for your car or your fleet. There was an article today in CNBC one of several today that were about oil. This article basically said $100 yes, but not a surge like we all saw in 2008. They made good points. I have read and heard oil company CEO’s say just the opposite. Case in point, Joe Petrowski, CEO of Gulf Oil thinks there is a 25% chance that by the end of May crude oil prices will be $150. Gulf Oil sells fuel downstream at gas stations so high prices do not serve his company well.

China is trying to control its inflation but oil consumption is expected to increase by 5% there in 2011 over record 2010 numbers. Precious metals continue to trade higher because of China’s demand and other growing countries. U.S. gas demand has been flat the last couple of years but diesel fuel has continued to grow even in a slower economy.

We think crude oil will pass $100 a barrel sometime by mid February. This will boost the national cost for diesel fuel close to $3.50. It would not be surprising to see crude prices go to $115 and then back off and settle in the High $90 a barrel or $100 a barrel. Basically for each for each $1 a barrel crude oil increase diesel fuel increases 2-3 cents per gallon. With gas prices for each $1 increase in a barrel of crude, gas increases 1- 2 cents per gallon. Every part of the country is slightly different based on supply, taxes, etc.

It is not our intent to scare anyone, but to try and keep everyone informed to the best of our knowledge. We are a fuel management company and not a fuel forecasting company but I hope we are able to at least add a little insight. Please visit our website blog at www.fuelmanagementsokolisgroup.com/blog/ for updates.

If you have any questions, please free to drop me an email gsokolis@sokolisgroup.com. For all fuel management needs please call 267-482-6155.

My view on most things is prepare for the worst and hope for the best.