The arctic temperatures and snow storms sweeping across much of the U.S. east coast and into the south is ramping up demand for home heating oil, which is made from the same petroleum distillate that diesel fuel is made from. As a result, prices for both diesel and heating oil could move higher in the coming months.
Mark Wolfe, executive director of the National Energy Assistance Directors Association (NEADA), recently noted the weather forecast now indicates that this winter could be “the coldest in 10 years” with January and February home heating bills expected to be much higher than in 2017.
NEADA projects that national average cost of home heating will increase from $783 to $861 – the highest price increase since the winter of 2014-2015, with the cost of home heating oil up 17%.
As a result, gasoline and diesel futures have climbed above five-year highs for this time of year, according to press reports, though prices for both fuels should not see spikes as high as what occurred back when Hurricane Harvey hit the U.S.
The Energy Information Administration (EIA) noted that spot energy prices, particularly for diesel fuel, started climbing rapidly at the close of 2017 and could continue their upward climb.
After decreasing nearly 20% in the first half of 2017, the spot energy index in the Standard and Poor's (S&P) Goldman Sachs Commodity Index (GSCI) ended 2017 16% higher than the beginning of the year, the agency noted.
Higher crude oil and petroleum product prices in the second half of 2017 were responsible for the increase in the S&P GSCI energy index, with petroleum-based products such as reformulated gasoline blendstock for oxygenate blending (RBOB), ultra-low sulfur diesel (ULSD), and gasoil together accounted for 24% of the S&P GSCI energy index.
ULSD had the largest price increase among energy commodities. Increased global trade and accelerating global manufacturing activity have resulted in relatively high global distillate consumption, EIA added.
Gasoline prices did not increase as much as distillate and crude oil prices. U.S. gasoline consumption growth slowed from 2016 to 2017, the agency said, compared with the prior two years when sharp declines in gasoline prices, among other factors, contributed to strong gasoline consumption growth.
EIA noted that the U.S. average price for diesel climbed 7 cents this week to $2.973 per gallon, which is 38.7 cents per gallon higher compared to the same week in 2017.
Diesel prices were up in every region of the U.S., the agency added, with the Central Atlantic region witnessing the highest increase, an 8.3 cent per gallon spike, to $3.151 per gallon – the second-highest per-gallon cost for diesel in the U.S., behind only California, which is at $3.59 per gallon.
The U.S. average price for gasoline also increased this week, jumping 4.8 cents to $2.52 per gallon, which is 14.3 cents per gallon higher compared to the same time period last year.
Gasoline prices were up in every region of the U.S. except for the Rocky Mountains, which witnessed a 1.3 cent drop to $2.437 per gallon. Gasoline prices jumped the most in the Lower Atlantic region, climbing 8.4 cents to $2.388 per gallon.