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Crazy eight: DOE/EIA price up almost 5 cents, 8th straight increase

Benchmark number at its highest level in almost 9 years exactly

Photo: Jim Allen/FreightWaves

It is now eight consecutive weeks that the weekly Department of Energy/Energy Information Administration benchmark diesel price has moved up, and it shows no signs of slowing.

The latest increase was 4.9 cents a gallon, effective Monday. It placed the price that is used as the basis for most fuel surcharges at $4.104 a gallon. That’s the highest level since it was $4.13 almost nine years ago exactly, on March 4, 2013.

But that 2013 price translates to $4.99 a gallon in today’s dollars. 

That difference is significant, because while the price may appear to be painful, it still has a ways to go to theoretically be as painful as it was nine years ago. 

The fact that the market is far from the inflation adjusted price of 2013–or 2008, the all time high–may be why Goldman Sachs issued a report about the price of oil and demand destruction. According to a report from Bloomberg, Goldman has issued a report in which it said oil prices would need to move higher for demand destruction to be a factor in the market.

Demand destruction is exactly what it sounds like: a sharp drop in demand, in this case caused by high prices. 

Brent crude settled Monday on the CME at $100.92 a barrel, the first time it has settled above that level in the current run-up. It traded as high as $104 earlier in the day. 

“The short-term price upside for oil is $110 to $120 should 2 to 4 million barrels a day of demand destruction be required to compensate for a commensurate one-month loss of Russian exports,” Bloomberg wrote of the Goldman report. It also said demand destruction is the only aspect of the market that can put the brakes on the current price movement.

(For more news on how oil markets reacted Monday in reaction to the Russian invasion of Ukraine, please see this article.).

The latest increase in the DOE/EIA price is the eighth consecutive week that it has risen. It still has a long way to go to set a record: The price series rose 20 consecutive weeks between November 2020 and March 2021. 

However, what’s notable about the latest run is that the size of each weekly increase has been significant. The 4.9-cent move this week is only the sixth biggest of the eight individual increases, and the run of price hikes has added 49.1 cents to the benchmark. That’s about 60% of the 82.2 cents added during the 20-week streak.

The price of ultra low sulfur diesel on the CME commodity exchange Monday rose a whopping 16.39 cents a gallon, settling at $3.0134 a gallon. That marks the first settlement above $3 in the contract since June 26, 2014.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.