Dire diesel prediction: prices could average $5.25 a gallon, reach $5.50 in some areas

Global Insight Managing Director Mary Novak says oil may go to $150 a barrel and diesel could average as much as $5.50 a gallon or higher

By DOROTHY COX
The Trucker Staff

6/10/2008

WALTHAM, Mass. — Trying to pin down even the experts as to what diesel prices may or may not do in the near future is like trying to herd cats or nail gelatin to a tree. They will give you their predictions, but by the time it comes out in print, those prices will have gyrated up or down.

Unfortunately for truckers and other users of diesel, those gyrations have steadily been going up.

Just recently, one expert is saying that oil could hit $150 a barrel and that if the consumption of diesel stays the same and the economic picture stays the same (and she couldn’t think of why they would change for the better), that diesel will average nationally around $5.25 a gallon in the next two or three weeks and could reach $5.50-$5.60 in some areas because of the “bidding war” that is going on globally for diesel.

China, which is building an infrastructure much like when the U.S. was building its then state-of-the-art interstate system, is using diesel hand-over-fist. India also is emerging technologically and using copious amounts of diesel. Added to that are European countries, where cars almost exclusively use diesel, not to mention trucks.

The cost to refine crude into diesel adds a certain amount to the price of a gallon of diesel; then that price is being “bid up” because of the competition for the limited amount of diesel, said Global Insight Managing Director May Novak.

“A little more oil supply is supposed to come on the market the second half of the year but unless there is a real slowdown in oil demand growth in Asia, prices are going to stay very high and U.S. will be paying $5 for gasoline and $5.50 for diesel,” Novak predicted.

“We talk about the global crude oil market, but after you get there, you have these competitive markets on particular products and they go wacky.

“Gasoline hasn’t had that. Gasoline margins have been at rock bottom and diesel margins have been skyrocketing and it’s because the demand for diesel in both the U.S. and Europe has been growing so strongly.”