For immediate release: November 23, 2009
Diesel Fuel Spot Prices Predicted to Rise in 2010, Says Dallas Fed’s Economic Letter
DALLAS—Crude oil prices, seasonal shifts and regulatory changes are major factors driving long-term diesel fuel prices, according to the latest issue of the Dallas Fed’s Economic Letter.
In “What Drives Diesel Fuel Prices?” Jackson Thies and Stephen P.A. Brown note that diesel prices departed from historic norms in recent years and rose above gasoline prices on spot markets. They estimate that spot diesel fuel prices should rise 25 cents a gallon over the next six months and 41 cents a gallon over the next 18 months. Diesel is heavily used in commercial vehicles.
The author’s model predicts a spot-market diesel price of $2.15 a gallon in June 2010. That equates to a pump price of around $2.92 a gallon, the authors say. The rate and timing of the world economy’s recovery from recession could have a substantial effect on crude oil prices and, therefore, the cost of diesel fuel, the authors state.
“A sluggish rebound will hold down diesel prices, and a faster bounce back will put upward pressure on diesel prices, raising costs in shipping and other transportation industries,” Thies and Brown write.
Thies is a research analyst at the Dallas Fed, and Brown is a nonresident fellow at the nonprofit research organization Resources for the Future.
Phone: (214) 922-5288