Diesel Continues to Slide, Drops 1.7 Cents to $3.338 a Gallon

truck on a highway

(Transport Topics) – The U.S. average retail price of diesel dropped 1.7 cents to $3.338 a gallon as prices for West Texas Intermediate crude oil continued to sink despite concerns that global supplies could fall amid U.S.-imposed sanctions on Iran.

It was the third consecutive weekly decline in the price of diesel.

Trucking’s main fuel costs 45.6 cents a gallon more than it did a year ago, when the price was $2.882, the Department of Energy said Nov. 5.

Average prices fell in all regions of the country. The highest one was in California at $4.074.

The national average price for regular gasoline fell 5.8 cents to $2.753 a gallon, DOE’s Energy Information Administration said. The average is 19.2 cents higher than it was a year ago.

Meanwhile, oil company Phillips 66 and Renewable Energy Group Inc. announced plans for the construction of a large-scale renewable diesel plant on the West Coast.

The plant would utilize REG’s proprietary BioSynfining technology for the production of renewable diesel fuel. Planned feedstocks include a mix of waste fats, oils and greases, including regionally sourced vegetable oils, animal fats and used cooking oil, according to the companies.

The facility would be constructed adjacent to the Phillips 66 Ferndale Refinery in Washington state. The Ferndale Refinery offers existing infrastructure, including tank storage, a dock, and rail-and-truck-rack access.

“The West Coast is an attractive market for us; we currently sell a number of products there to a number of segments, including trucking,” Renewable Energy spokeswoman Katie Stanley said

At the same time, one truck maker based in the Northwest suggested diesel-electric hybrid trucks could play a strong role in meeting emission regulations in urban environments.

“I think there’s a growing sentiment that maybe the diesel [engine] with a zero-emission hybrid capability may be the best economic solution for those inner-city applications where you need that zero-emission requirement,” Paccar Inc. President Harrie Schippers said during a recent earnings conference call.

Paccar is the parent of the truck brands Kenworth Truck Co., Peterbilt Motors Co. and DAF.

A full-electric option still requires a breakthrough on the batteries and the weight, he said. Otherwise, “the economic case is a bit challenging.”

Schippers also is Paccar’s chief financial officer.

One petroleum analyst sees prices continuing to fall for oil and diesel.

“I think there are [pricing] headwinds across the board, quite honestly. Things with diesel have been trending lower. Ultra-low-sulfur diesel futures are down 12 or 13 cents,” Denton Cinquegrana, chief oil analyst at Oil Price Information Service, told Transport Topics on Nov. 2.

One near-term crimp on demand is that U.S. refineries still are going through maintenance, he said.

But looking ahead, oil prices remain high for some markets such as India, Argentina and Turkey that pay for oil that is priced in dollars. “So there has been some concern about demand destruction,” he said.

U.S. sanctions reimposed on Iran oil sales stoked additional concerns of a tightening supply in the market.

But Cinquegrana said Iran is no stranger to sanctions and has “little tricks up their sleeves” of getting some of its oil onto the market somehow.

One method is turning off transponders on its oil tankers so the ships cannot be easily tracked, he said, or they have brought oil into neighboring Iraq and shipped from there.

“To get [Iran’s} exports down to zero is really a tall order,” Cinquegrana said.

Secretary of State Mike Pompeo said Oct. 5 that China, India, Japan, South Korea, Taiwan, Italy, Greece and Turkey have been granted waivers that will allow the countries to keep buying Iranian oil temporarily. Iran either can change its behavior or see its economy collapse, Bloomberg News reported.

West Texas Intermediate crude futures on the New York Mercantile Exchange closed at $62.85 per barrel Nov. 5 compared with $67.04 on Oct. 29.

Oil prices have fallen from $74.34 on Oct. 5.