DOE/EIA benchmark diesel price sees biggest 1-week drop since August

While the front-month spread between Brent and ULSD is down to a little more than $1.23 per gallon from a recent high of about $1.43 just six days ago, the fact remains that the spread began the year at less than 50 cents. What that means in terms of pump prices is that even if the price of crude didn’t budge all year, the retail price of diesel would likely now be 60-70 cents per gallon higher than at the start of 2022. 

With Monday’s decline of 2.37 cents per gallon to $3.2154, the ULSD price on the CME commodity exchange is now down 78.35 cents per gallon since a recent high just under $4 on Nov. 3.

Wholesale prices tend to track futures moves with a high degree of correlation. The national average wholesale diesel price — as measured by the ULSDR.USA data series in SONAR — came in Monday at $3.58 per gallon, down from $3.824 just one week earlier/

But even though diesel fell Monday as crude rose, there were other trading levels reached that reflected just how strong diesel has been relative to crude in 2022.

Earlier in the trading day Monday, the price of U.S. benchmark crude West Texas Intermediate (WTI) slipped below the level it had settled at on the first trading day of 2022, effectively wiping out all the increases recorded this year. 

WTI on the CME commodity exchange traded Monday as low as $73.60 per barrel. At that point, it was $2.68 per barrel less than where it settled Friday. And it was also below the $76.08 per barrel settlement of Jan. 2, the first trading day of the current year. WTI on Monday rebounded from those lows, and its settlement of $77.24 was above that Jan. 2 price. 

But to contrast that with the strength diesel has shown this year, the lowest price of ultra low sulfur diesel posted Monday on CME was $3.1780 per gallon. That’s just about 82 cents more than the Jan. 2 settlement of ULSD, as diesel has climbed far more than crude over the course of the year. Diesel has been boosted by a long list of factors: tighter global and U.S. refining supply and the full impact the market has absorbed from the IMO 2020 rule on clean marine fuels, increasing the demand for distillate molecules. 

Looming over diesel and all fuel markets is the threat of a strike by the nation’s Class I railroads. While diesel rarely moves on tank cars, unlike crude oil, there are additives blended into both gasoline and diesel that rely on rail movements to supply refineries and downstream blending operations. 

A possible disruption to that was the focus of a joint statement released Monday by the National Association of Truck Stop Operators (NATSO) and the Society of Independent Gasoline Marketers of America (SIGMA), two groups whose focus when it comes to fuel is the adequacy of supply. It recently released an unusual joint statement about diesel supplies going into winter. 

In the statement, Tiffany Neuman, NATSO vice president of public affairs, specifically focused on two products moved by rail — ethanol and diesel exhaust fluid. 

“A prolonged railroad shutdown will constrain the nation’s fuel supply by disrupting the availability of ethanol, which is often an essential component of gasoline, and diesel exhaust fluid, which most heavy-duty trucks need to run,” Neuman said. “Amid tight fuel supplies and low inventories, idled rail cars stand to introduce a massive disruption in the availability of these additives, exposing the fuel market to a marked decrease in supply from which it would not be able to quickly adjust.”

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