Retail Diesel Prices Top Gasoline Diesel Premium Stretches to 38 Weeks, Just Shy of Record While both are fuels refined from crude oil, gasoline and diesel fuel are impacted by different demand factors, with the relationship between weekly retail gasoline and diesel fuel prices showing a clear seasonal pattern since March 1994. This pattern is exemplified during summer driving seasons, when average retail gasoline prices would typically move above average retail diesel fuel prices from roughly April through September, explains analysts with the Energy Information Administration in Washington, D.C. Similarly, diesel fuel prices usually move above gasoline prices during the heating season months of October through March, as diesel fuel and heating oil are very similar petroleum products, with their pricing strongly influenced by winter heating oil demand. Prior to this winter, the longest period for a diesel fuel price premium was 38 weeks, occurring from August 19, 1996 through May 5, 1997, which matches the current streak. Conversely, the shortest period for diesel fuel prices holding a premium over gasoline was 4 weeks, from December 8 through December 29, 2003. Since the winter of 1996-97, the period for higher diesel fuel prices appeared to be trending downward, perhaps indicating a smoothing in the transition between the peak summer driving season and the winter heating season. However, this pattern abruptly ended with the 2004-2005 winter. Not only has the diesel premium matched or lasted longer than at any time since EIA began collecting weekly retail diesel prices, but the gap widened sharply this winter. Historically, the price gap averaged about 2 to 8 cents per gallon in favor of diesel fuel during the winter. However, this past winter season saw the gap widen to an average of about 11 cents per gallon through May 16, including a nearly 20-cent per gallon price premium reached on December 27, 2004. Contributing to this season’s gap were exceptionally low stocks of distillate fuel throughout the winter and strong demand for heating oil and diesel fuel. Despite rapidly rising gasoline prices during the late winter of 2004 and early spring months of this year, gasoline inventories tracked near the upper limit of their typical range for that time of year, creating a relatively looser market environment for gasoline, further widening the price gap during this period. As the winter heating season wound down, lingering industry fears over possible low distillate stocks heading into next winter seemingly combined with the perception of adequate gasoline supplies throughout the Atlantic Basin to extend the premium period to new lengths. Another factor contributing to this gap may be the emergence of very tight global supply/demand conditions for diesel fuel. With the bulk of strong Asian, especially Chinese, demand growth in middle distillate fuels, including diesel, and with continued strong U.S. economic activity also propelling rapid growth in diesel consumption, the global balance for distillate fuel has tightened seemingly much more so than that of gasoline. Although EIA’s current short-term outlook calls for the premium of gasoline over diesel fuel to return this summer, continued strong fundamentals in the U.S. and international distillate markets could make that projection a close call. Web source: http://oilspot2.dtnenergy.com/e_article000402964.cfm?x=b4VjFFy,bCDqgKf
