The benchmark diesel price used for most fuel surcharges has seen a slight increase for the fourth consecutive week. This minimal movement could indicate a stable market or one in a state of inertia. The Department of Energy’s Energy Information Administration reported a 0.2 cent per gallon increase in the average weekly retail diesel price, reaching $3.697. This follows three weeks of marginal increases, totaling 3.8 cents.
While the current price is significantly higher than the $3.476 per gallon recorded before Christmas, representing a 22.1 cent increase, most of this surge occurred in early January. The outgoing Biden administration’s announcement of new sanctions against Russian oil shipping propelled the ultra-low sulfur diesel (ULSD) settlement price on the CME commodity exchange to a peak of $2.621 per gallon on January 17th.
Despite a subsequent decline in ULSD prices to $2.4358 on Monday, retail prices haven’t mirrored this drop. The current market stability contrasts sharply with the volatility witnessed in the aftermath of Russia’s invasion of Ukraine three years ago. A recent Bloomberg article highlighted this unusual calmness, citing a Standard Chartered Bank report suggesting that the oil market is experiencing “paralysis” due to the overwhelming volume of new policies and the potential impact of social media on market sentiment. Traders, hesitant amidst this uncertainty, have reportedly reduced their risk exposure.
Last Thursday, the ULSD price saw a notable increase of 4.69 cents per gallon, settling at $2.5034. This contrasted with the previous week’s volatile swings, where significant daily fluctuations resulted in a net-zero impact. However, this potential shift in momentum was short-lived. The following day, ULSD prices plummeted 7.11 cents, negating the previous gain. Monday’s minor increase placed ULSD back within the $2.43-$2.465 per gallon range, where it has remained for nine of the past eleven settlements.
This persistent stability has left analysts searching for even minor market factors to explain the minimal price fluctuations. The current situation begs the question: is this extended period of calm merely a precursor to a significant market shift, or is the diesel market truly stuck in a rut? Only time will tell if this stability is a sign of a balanced market or a temporary lull before a period of increased volatility.
