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LONG BEACH, June 20 – TRUCKERS have no illusions about the skyrocketing price of diesel fuel or what it means for the motor carrier industry. Nor do shippers harbor any doubts about the potential adverse impacts on their sales either.

Even President Biden sees the price of diesel as a matter of concern for his future, with polls suggesting that voters might turn away from him in search of a candidate who can do something about the runaway costs.

So, what’s the situation? What is really going on when it comes to the price of diesel fuel, how long are high prices expected to last, and – most of all – what can be done to bring them down?

The Energy Information Administration is the go-to source when it comes to understanding the status of energy supplies in the United States, especially when it comes to oil and oil products such as diesel fuel.

In its most recent Short Term Energy Outlook report, the EIA explains the current situation regarding diesel prices, pointing out that they are “above historical averages” due to several factors.

The first is simply that there are low inventories of diesel around the world generally. Second, that demand for diesel has increased to “near” pre-pandemic levels. Third, there is relatively low refinery production of diesel compared with pre-pandemic levels.

Putin’s price hike

Not least, Russia is exporting less oil and fewer petroleum products like diesel fuel, a point that President Biden highlights with repeated remarks about the “Putin price hike” – a reference to Russia’s President Vladimir Putin and effects of his war against neighboring Ukraine. 

The EIA supports the president’s view, forecasting that Russia’s production of total liquid fuels will decline from 11.3 million barrels a day in the first quarter of 2022 to 9.3mn b/d in the fourth quarter of 2023 – a drop of 2mn b/d, further tightening supplies.

The EIA does not rule out the impact of sanctions on Russia now or in the future, saying they could reduce the country’s oil production even more than expected and create “upward risks” for crude oil prices during the forecast period. That means diesel prices also could suffer “upward risks” or, in plain English, go higher.

The agency reports the steep price rise over the past couple of years, noting that in 2020 the average annual retail price of a single gallon of diesel was $2.56 as opposed to $3.29 in 2021 and $4.69 so far in 2022. 

The AAA reports even higher prices

But that average is not reflected in the much higher daily fluctuations being recorded by the American Automobile Association which on June 17 said that the current national average price of a gallon of diesel stood at $5.798 – $1.10 more than the EIA’s average price for 2022.

Then, too, according to the AAA, the price will be higher or lower depending on where you source the fuel. If you’re buying in California, the price is $7.008 per gallon, while in Texas its $5.303 for the very same gallon of fuel. 

But truckers are complaining about price even when they go to Texas. 

As he prepared to fill his rig with nearly 160 gallons of fuel at Carter Express’ corporate headquarters in Anderson, Indiana, Marcus Speikes told local media that he was thankful for one thing.

“I’m happy it’s the company (paying for fuel) and that it’s not out of my pocket,” Speikes said. “I couldn’t afford to have my own truck and pay $900 or $1,000 every time I have to fill up.”

Speikes told the paper that’s what it costs to cover the roughly 2,800-mile round trip from Anderson to Laredo, Texas, that he hauls freight on each week. A few months ago — around the time Russia invaded Ukraine — Speikes said the trip required just $500 in fuel.

“It’s basically doubled,” he said.

A price drop is on the way, but…

The EIA does believe the price of diesel will soon start to decline, although not sharply and nowhere near the pre-pandemic rates.

“We expect wholesale prices for gasoline and diesel will begin decreasing in the third quarter of 2022, as refinery production increases,” it said. 

Despite that price decline, the agency still expects wholesale fuel prices to remain “well above previous years through the summer” due to the higher cost of crude and the continuing impact of “low global inventories”. 

If that’s not bad enough, the EIA thinks those low international inventories are likely to face “additional tightness” in response to the recently announced European ban on importing energy from Russia.

The solution to the problem of high-priced diesel comes down to a greater supply of crude on global markets, increased production of diesel, and reduced demand – all unlikely to take place in the near future, especially as “peak season” approaches and, with it, the demand it imposes for greater amounts of diesel.

Meanwhile, the EIA forecasts that retail diesel will average $4.78 a gallon in the third quarter of 2022, up $1.09 over the agency’s current average. For truckers, that’s expensive news coming down the pike.