As last week's price of diesel edged down 4.6 cents from the week before to $4.718 per gallon, the Department of Energy (DOE) was forecasting a price average for 2008 at $4.35 per gallon and $4.48 per gallon in 2009. Those projections compare to the real 2007 average price of $2.88 per gallon.
DOE said in its July monthly report that the higher prices reflect strength in diesel demand, particularly in emerging markets, which has significantly increased the margins between diesel prices and crude oil costs from those of last year. Over the next few months, these prices are projected to remain near the June 30 price of $4.65 per gallon as refiner margins begin to weaken slightly, offsetting the projected rise in crude oil costs.
Meanwhile, last week's average price for low sulfur diesel was $4.629 per gallon. Ultra low sulfur diesel followed a similar path to $4.729 per gallon.
As the high prices continued to stagger trucking company budgets, the American Petroleum Institute (API) issued its first half of 2008 petroleum report, noting that diesel production set new records in that time period. Production of low-sulfur diesel was also a record, at nearly 14 percent higher than for first-half 2007. Included within that was a nearly 17 percent increase in output of ultra low sulfur diesel, the main fuel required for on-highway use.
At the same time, all US petroleum deliveries, which are a measure of demand, experienced their largest year-to-year decline in 17 years. Deliveries fell 3.0 percent in the first half of 2008 from a year earlier. Gasoline deliveries alone fell 1.7 percent, their first significant decrease for a six-month period since 1991. Deliveries of all other major products also shared in the decline, according to the API report.
"United States petroleum deliveries growth had already been faltering during the prior three years, managing only to hold relatively steady over that period," API stated in the report. "With this year’s decline, first-half deliveries, at 20.08 million barrels per day, were at their lowest for any six-month period since early 2003."
API noted that gasoline inventories ended June 2008 at 212 million barrels, up 3.6 percent from a year ago, while distillate inventories slipped three percent from a year ago to 120 million barrels. However, inventories of ultra-low sulfur diesel were up more than eight percent from a year ago.