Yahoo Finance Diesel Prices Fall to $2.723 per Gallon on Monday, July 27
July 27 Week: Bad for Crude Oil and Refined Product Prices
Diesel prices
On Monday, July 27, US on-highway diesel prices averaged $2.723 per gallon. This represents a fall of 2.12% from $2.782 per gallon recorded on Monday, July 20. Prices are 29.41% lower than they were a year ago.
The EIA (U.S. Energy Information Administration) releases weekly diesel fuel price updates every Monday. These prices are national averages calculated by the EIA.
Why do diesel prices matter?
A fall in diesel prices might push refiners—like Phillips 66 (PSX), Marathon Petroleum (MPC), Tesoro (TSO), and Valero Energy (VLO)—to reduce their diesel production, all else remaining equal. Like gasoline, which we discussed in the last part of this series, investors also need to watch crude oil prices to gauge what could happen with diesel prices and production.
Diesel benefits from strong demand in European countries. They rely heavily on diesel-fueled vehicles. So, keep in mind that refiners will also look at the feasibility of exporting diesel to satisfy overseas markets.
Together, Phillips 66, Marathon Petroleum, Tesoro, and Valero Energy account for 8% of the iShares U.S. Energy ETF (IYE).
Apart from being affected by crude oil prices, diesel prices are influenced by distillate inventory levels. For more on this topic, read Distillate Inventories Rise Marginally in Week Ending July 17.
If refiners choose to lower production, MLPs—like Western Refining Logistics (WNRL)—would have less volume to transport. This could hurt their revenue.
Diesel price forecasts
According to the EIA’s STEO (Short-Term Energy Outlook) released on July 7, diesel fuel retail prices will average $2.86 per gallon in 2015. They will rise to $3.03 per gallon in 2016. Prices averaged $3.36 per gallon in 2014.
The EIA’s “Annual Energy Outlook” for 2015, was released on April 14. It states that “The effect of rising crude oil prices on distillate fuel use in the United States is less than for motor gasoline, because of a greater increase in distillate fuel demand as freight requirements continue to grow and the mix of light-duty vehicle fuels shifts from gasoline to diesel fuel.”
The EIA will release its next STEO report on August 11.
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