The weekly Department of Energy/Energy Information Administration average retail diesel price has now done something it hasn’t done in the history of the series: risen 16 consecutive weeks.
Not only that, but the increase posted Monday of 9.7 cents was the largest one-week increase since the first week of September 2017, when the U.S. Gulf Coast refining industry had been slammed by Hurricane Harvey.
The latest increase takes the price up to $2.973 a gallon. That is 60.1 cents more than the $2.372 a gallon in the first week of November, the last price before the 16-week run began. The series goes back to 1994.
It is also the highest price since the week of Jan. 27, 2020, when it was $3.01 a gallon. Markets had started to be pressured downward by the middle to end of January last year by the prospect of the pandemic.
At that point, the global sweep of the virus was not foreseen, but the prospect that it would hit international travel was very much a factor in diesel prices. Jet fuel is like diesel; both are middle distillates. The assumption as the first news came out of China about the virus was that the part of the oil market that would get slammed the hardest would be jet fuel.
To fully recapture all of the downward movement created by the pandemic, the price would need to surpass $3.064 a gallon, the number published Jan. 13 of last year.
Looming over the market is the status of Texas refineries closed down as a result of the deep freeze that hit the state last week. Whether because of cold-inflicted damage, a lack of electricity or a lack of natural gas, the state suffered a huge decline in refining activities last week.
S&P Global Platts reported Monday that ongoing restarts are bringing at least 2.3 million barrels a day of refining capacity back online. But those plants do not come back online immediately. For example, Platts reported that the Motiva refinery owned by Saudi Aramco, with a capacity of 607,000 barrels a day that makes it the largest in North America, filed a report with a Texas agency that said it does not expect to be fully back until March 11.
Platts also estimated that about 2 million barrels a day of refining capacity, primarily in the Houston area, is shut with no indication of when it will return. At least two refineries — one operated by Shell and Marathon Petroleum — have reported specific problems that resulted from the cold weather.
In a story published by Platts, Sandy Fielden, director of energy research at Morningstar, noted that the rebuild of infrastructure damaged by the cold snap will be diesel-intensive. Refiners are likely to “crank up” diesel output as a result, he said.
The commodity price of ultra low sulfur diesel on CME rose sharply Monday, climbing 2.87 cents a gallon to $1.8586 a gallon. That is the highest settlement price since Jan. 17 of last year, when a settlement of $1.8592 was part of the first rumblings of a falling diesel market due to the news out of China about the strange new virus.
Markets continue to be driven higher not only on the loss of refining capacity. On top of that, estimates that there are still about 2 million barrels a day of onshore capacity offline as a result of the deep freeze is also boosting prices.
One impact from the storm that appears to be no longer a problem: diesel fuel at retail outlets. The major three truckstop chains — Love’s, TA and Pilot Flying J — were reporting either no outages or only minor ones on Monday, as opposed to a significant number of outlets last week that didn’t have diesel fuel.