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Diesel fuel prices up due to market volatility

Diesel fuel prices have increased once again.
/ Industry News & Trends /

By: Phil Sneed

For the second straight week, diesel fuel prices have increased across the country. According to the U.S. Energy Information Administration, prices as of Oct. 12 were $2.56, which represents an increase of $0.064 nationally. While that increase may seem miniscule to an outside observer, the price jump represents a larger, perhaps more unsettling trend and one logistics management companies must take into consideration.

The price of diesel fuel has now risen for the third straight week after briefly declining toward the end of September. Diesel fuel is also following the trend of other types of fuel, which have also increased in the same time and in all areas of the country, prices are up. According to TruckingInfo, the largest increase occurred in the Midwest, where diesel prices jumped spiked 14.2 cents. The publication also stated the smallest increase was in the New England area, where prices only increased by about 0.2 cents.

The decrease of oil prices at the beginning of September and subsequent increase since then comes during a time when the global oil market is facing its own volatility. While shippers and carriers have domestic matters to prioritize, they can't ignore overseas happenings. The prices of oil have a big effect on shipping, especially with the holiday season swiftly approaching.

"Many factors are taken into account that have an influence over oil prices."

Oil market fluctuation
Many factors are taken into account that have an influence over oil prices. Political happenings, various market players and global demand are some of the main components. For instance, Iran's parliament approved the nuclear deal with six other countries. According to The Wall Street Journal, this is one step closer toward the loosening of economic sanctions against the country, and when that happens, oil production will increase. As a result, other oil producers will face an even greater challenge.

Oil production levels from the U.S. also have to be taken into consideration. According to the EIA, the country is producing oil at the highest levels since 1970, however there is a general consensus, as cited in The Wall Street Journal, that production levels will soon decline. Part of the decrease stems from the global oversupply of oil. Prices may also be affected by a slowing global demand for oil. According to International Energy Agency, global demand for oil is expected to slow to 1.2 million barrels a day. Current demand levels are at 1.8 million barrels, a five year high. When combined with the increased oil production from Iran, the agency predicts an oversupply in the market.

While oil prices have indeed increased in recent weeks, a future decrease wouldn't be out of the question. With holiday shipments starting in full force in just a few weeks, low diesel prices are vital for carriers to maintain costs.

Diesel fuel has recently come under fire because of a handful of car companies not being honest with their testing procedures. However, diesel remains vital to the operations of semi-trailers across the country. It's important for everyone involved in the trucking industry to pay attention to the global prices of fuel, as it could have an effect on operations as the holiday season approaches.