After more than two weeks of delays, the Energy Information Administration late Thursday released three weeks’ worth of its benchmark retail diesel prices that ultimately showed a decline of just 4.3 cents since the most recent price with plenty of volatility in between.
The EIA said a major technical problem prevented the agency from reporting the weekly price on June 21, a day later than normal because of the Juneteenth holiday. That ultimately turned into a delay of more than two weeks, with no prices being reported June 27 or this Tuesday, also a day late because of the Fourth of July.
However, the EIA said that while its ability to publish prices was shut off because of the technical issues, it continued to gather data, enabling the delayed publishing of the prices that serve as the basis for most fuel surcharges.
While the three-week change from the June 13 price to that of July 4 was just a few cents, it was an up-and-down ride to get there. The June 20 price of $5.81 per gallon was 9.2 cents per gallon more than the price of June 13. The June 27 price a week later was down 2.7 cents per gallon.
And then the most recent price, effective Monday, reflected some of the significant decline in global diesel markets that has been occurring since mid-June, dropping 10.8 cents to $5.675. Even after that decline, it is still the fifth-highest price in the EIA series going back to 1994, with all of the top five coming since the start of June.
On June 13, the most recent date the EIA released its weekly diesel price before Thursday’s data dump, the price of ultra low sulfur diesel on the CME commodity exchange was $4.2834 per gallon. It rose as high as $4.5719 per gallon just three days later before beginning a slide that took the ULSD price as low as $3.4106 per gallon on Wednesday. The ULSD price Thursday came roaring back to add 26.33 cents per gallon, settling at $3.6739 per gallon. At about 6:50 a.m. EDT Friday, the slide had resumed and ULSD was down another 6.5 cents per gallon.
While wholesale prices will seek to track the movements in futures prices, retail prices — set by the owners of the retail outlets — are not programmed to keep up with such rapid moves. There also is a demonstrated reluctance by station owners to move prices down as quickly during a price slide as to raise them during a price increase.
That has never been more true than now. The FUELS.USA data series in SONAR reached $1.822 per gallon Thursday, easily the highest in the history of the series, which goes back to early 1994. While the FUELS.USA number is often volatile, its long-term average tends to be in the $1 to $1.10 per gallon range. Prior to the recent surge, the highest number in the FUELS.USA data series was just under $1.60 per gallon, in the first weeks of the pandemic when global oil prices were crashing and retail numbers had not followed suit.
The recent decline in oil prices has seen diesel take the brunt of the fall. Whereas diesel had significantly outpacing crude during most of the spring, that has reversed. On June 3, the futures price for ULSD on CME was roughly $1.40 per gallon more than the price of global benchmark crude Brent. That spread declined to just under 84 cents Wednesday before rising to just under 93 cents a day later.
Helping to propel some of the movement has been a rise in diesel inventories, which had been a key driver of diesel’s strength. National ULSD inventories, according to the EIA, got as low as 94.6 million barrels in early May. By the June 24 weekly report of the EIA, they had risen to just under 102 million barrels before falling back slightly in the subsequent week. A year ago, they were 124.7 million barrels. Two years ago, in the depths of the pandemic, inventories were 160.6 million barrels.
Another factor driving the recent decline has been the reaction of the nation’s refining sector to tremendous margins. Not surprisingly, they are running full out. The national refining operating rate last week in the week ended June 24 hit 95%. The following week, it slid to 94.5%. No data has been released for subsequent weeks. But at 95%, the refining utilization rate is effectively full; it is virtually impossible to run at 100% before various technical issues develop and keep the rate below that benchmark.