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Diesel’s fuel surcharge benchmark is up, even as futures suddenly drop

Strong crack spreads may be leading traders to sell diesel even as they are buying crude

John Kingston
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The key benchmark rose though diesel futures prices are starting to drop. (Photo: Jim Allen/FreightWaves)

The diesel market is being pulled in all different directions as evidenced by developments over just the past few days.

On Monday, the Department of Energy/Energy Information Administration average weekly retail price increased 9.3 cents a gallon to $4.633. It’s the highest price since Dec. 12, when the price was $4.754 a gallon. That price is used as the basis for most fuel surcharges.

The price is up 86.6 cents a gallon since a recent low on July 3. But the increase is a perfect example of the retail market lagging the futures and wholesale markets, in this case by a considerable amount.

Ultra low sulfur diesel (ULSD) on the CME commodity exchange posted a recent market low of $3.1927 a gallon on Sept. 6, the second day of trading after the Labor Day holiday. 

Prices then climbed as high as $3.4815 on Thursday, an increase of 28.88 cents a gallon in just six trading days.

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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.