Think Opposite When It Comes To Diesel Fuel Prices

This past week the Department of Energy price for diesel fuel prices fell again to below $3.86 a gallon. Good news right? Not so fast. Retail margins have been through the roof. Meaning you have been paying more than your company should be unless you have taken a professional approach on managing your diesel fuel prices prior to February when this crazy market began.

Our clients over the past 2 months have been buying fleet fuel for 20-40 cents per gallon less than the DOE prices. If you want to talk about improving fuel savings reach out to Conor Proud at our office at [email protected] or 267-482-6159.

Why think the opposite on your diesel fuel prices. Let’s look at what has been going on.

• Price of crude oil was going down at a slow steady pace. From $97 a barrel to $93 a barrel. As you’ll recall for each $1 crude goes down diesel fuel prices and gas prices should go down 2-3 cents a gallon. (slow and steady downward trend is good, shows investors are becoming comfortable with the pricing)
• OPEC had decided not to increase production but the only country in OPEC that has any substantial capacity to increase production, Saudi Arabia goes against OPEC and says they will increase production by a million barrels a day. (more oil on the market, good to drive down fueling prices and the Saudi’s believe $80-$90 a barrel is a good price for the world economy?)
• Greece was on the verge of financial collapse. Follow that up with Portugal having the same types of problems. (unstable financial situations scare investors for a fear of growth slowdown, slow growth less oil needed)
• China raises interest rates in an effort to battle its inflation issues. (they won’t be using as much oil for growth)

If I haven’t already said this, these are all good things for crude oil prices to go lower. Also, I have been pretty firm that crude oil would hit the low to mid $80’s by middle to end of July.

Of course this is fuel and you never know what is going to happen. This time out of the blue geopolitical gets in the way. The International Energy Agency lead by the United States said it would release 60 million barrels of crude from the world strategic reserve, half of which will come from the U.S. Only the 3rd time since it’s inception in 1973 have we used this reserved oil. The other 2 times were the Persian Gulf War in 1991 and Hurricane Katrina in 1995. We didn’t release any in 2008 when prices went over $148 a barrel, so why now. Is this the newest economic stimulus package?

Yes, at first it made prices drop below $4 a barrel in a day and the market got to $89.69 a barrel for a short period. This is a big drop no one likes to see free market trade messed with artificially. So after the bulls and bears had a chance to reflect after a few days along with minimum upbeat news of the U.S. economy, prices had shot back up close to $99 a barrel. Top investment banks like Goldman Sachs, Barclays Capital and Morgan Stanley all have reported that crude oil prices will go higher later this year and next. Ok, like they don’t have some kind of vested interest in coming out with these reports at this point in time. Was this to create perhaps a panic state for buying oil? I agree fuel prices will go higher later this year and next year but you don’t need to spook the market anymore than it has already.

Friday a terrible jobs report comes out and pushed fleet fueling price lower. What will happen next…..?