Average retail pump prices for both diesel and gasoline increased this week across the U.S., and that’s a symptom of a global oil market that’s become far more sensitive to pricing swings, suggests a new report. The national average for diesel climbed 4/10ths of a penny this week to $2.835 per gallon, according to data tracked by the Energy Information Administration (EIA), though that is $1.142 per gallon cheaper compared to the same week in 2014.
Diesel prices were up in five U.S. regions while declining in four, the agency noted. Diesel exceeded the $3 per gallon market in three areas: California at $3.061 per gallon (up 3.4 cents this week); New England at $3.039 (up 1.1) and the Central Atlantic at $3.042 (up 1/10th of a penny).
The biggest one-week jump in diesel prices occurred on the West Coast, said EIA: up 3.8 cents to $2.924 per gallon with California included and up 4 cents to $2.756 with California removed from the mix. The national average for gasoline, however, jumped a more substantial 12.3 cents this week to $2.191 per gallon, the agency reported, though that’s $1.118 per gallon cheaper compared to the same week in 2014. Looking at the bigger picture, price volatility was the focus of an annual update by the International Energy Agency(IEA).
The IEA noted in its Medium-Term Oil Market Report that the recent crash in global oil prices that began last June is causing the crude market to “rebalance” in ways that will “challenge traditional thinking about the responsiveness” of supply and demand.
In particular, the U.S. “oil revolution” is making non-OPEC production more responsive to price swings than during previous market selloffs, adding that this would likely set the stage for a relatively swift price recovery. At the same time, lower oil prices will not provide as strong a boon to oil demand growth as might be expected, the group noted.
Among other findings from IEA’s analysis:
- Though supply will grow far more slowly than previously projected, global oil capacity will still expand by 5.2 million barrels per day by 2020.
- North America will remain a top source of oil supply growth for the remainder of the decade.
- Political risk to supply will remain extraordinarily elevated in the next few years, both on the upside and the downside. Lower oil prices may heighten the risk of political disturbances in oil-export-dependent economies countries with low buffers, but can also offer an incentive to maximize output and stimulate production growth.