How high will diesel fuel prices and gas prices get and what your company could do.
If this feels like 2008 when crude oil blasted to $148 a barrel, diesel fuel prices were over $4.85 and gas prices were close to $4.25, it’s not. It’s worse according to several fuel experts. Why you ask yourself as you see your company’s profits being pumped away on your fuel card. It’s a little like the weather, why is it 65 degrees and sunny one day and 18 degrees the next day. Many things happen to make those changes.
Let’s start with continued tension with Iran with the Strait of Hormuz, nuclear war, Syria and its ongoing tension. President Obama is saying “I don’t bluff” as he warns Iran about nuclear weapons. If you recall when your fuel savings were sucked up in 2008 there was the “war premium” built into the price per barrel then over other tensions in the World. Within the same article I read on Thursday in the New York Times a set of fuel experts said this market could go over $150 a barrel, which would make gas prices over $4.25 and diesel fuel prices over $5.00. In the same article other fuel analysts suggest that if the tension eases in the Middle East, crude oil could fall to $80 a barrel. But I say, could it really?
Let’s take a look at another topic that helped drive fleet fuel prices up in 2008. It was called a small country of China building for the Olympics. The U.S. hadn’t fallen totally in the tank, though $148 for crude put us there. Here is the point, when our economy goes so does the world economy. U.S. economy is getting better. Maybe not as fast as all of us would like but it’s moving in the right direct. China that little country with 1.5 billion people, their demand is rising again. They have been trying to hold inflation in place but people have needs and when you have almost 300 million people a year coming out of poverty level from your country, demand for fuel, food and other things going up. Remember 300 million people is the U.S. population.
Here is another fact making life difficult for fuel management: 3 refineries on the East Coast all within 45 minutes of each other have closed or are ready to close. The main refinery Sunoco Marcus Hook is due to close in July right at the height of gas season. It supplies 50% of the Northeast gas supply, ouch. The Department of Energy predicts that ULSD will be the most challenging product because of few alternative supply sources outside of the U.S. Gulf Coast. What will give? I think uncertainly is here to stay for a while like maybe forever in fuel.
As a fuel expert, I have to give you my view or it looks like I don’t have real solid view. I am not a fortune teller; if I was I would have made my fortune already and playing golf daily. My fuel expertise is in fuel management, fleet fuel planning, fuel auditing, improved MPG through idle reduction, but hey I have a view on this.
Based off the DOE National Diesel Fuel Price average of $4.02, I see the price going up 15-20 cents per gallon over the next 6 months. I believe prices will climb another 15-20 cents per gallon from that point forward. You want my view for another 6 months, another 10-15 cent increase. This all could accelerate if these storms clouds keep coming in from Iran and closing refineries.
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