All Quiet on the Diesel Front: Second Week of Small Increases in DOE/EIA Price

The U.S. Energy Information Administration (EIA) reported a second week of small increases in diesel prices, with the national average price per gallon rising to $3.46 as of September 10, 2024. This slight uptick follows a similar increase the previous week, when prices climbed from $3.45 to $3.46 per gallon. The recent price movements have been driven by a combination of factors, including increased demand for diesel, reduced global consumption, lower crude oil prices, and geopolitical tensions.



The EIA's diesel cost projections indicate that retail prices will average about $2.30 per gallon in 2025, with the price remaining relatively stable throughout the year. However, the first quarter of 2025 is expected to have the lowest projection of $2.30 per gallon, with prices climbing each quarter as the year goes on, reaching an average of $2.40 per gallon by Q4.

The primary factors driving the recent small increases in diesel prices are:

1. Increased demand for diesel: Economic growth in the U.S. increased diesel consumption by 50,000 b/d in 2024, putting upward pressure on diesel prices. This increased demand, particularly from industries like transportation, construction, and manufacturing, contributes to the recent price increases.
2. Reduced global consumption: Despite the increase in U.S. consumption, there has been a decrease in global diesel consumption. This global reduction in demand, coupled with increased U.S. consumption, can lead to a supply-demand imbalance, driving prices up.
3. Lower crude oil prices: The Brent crude oil spot price decreased in September 2024, averaging $74 per barrel. This decrease in crude oil prices can lead to lower production costs for diesel, potentially increasing supply and putting downward pressure on prices. However, the EIA also reports that the global production of petroleum and other liquid fuels is expected to increase by 2 million b/d in 2025, which could offset the impact of lower crude oil prices on diesel supply.
4. Geopolitical tensions: Geopolitical tensions, such as the Russia-Ukraine conflict, can disrupt global supply and demand dynamics, impacting diesel prices. These tensions can lead to increased uncertainty and volatility in the energy market, driving prices up or down depending on the specific circumstances.

To capitalize on potential developments in the diesel market, investors can adapt their investment strategies by:

1. Monitoring geopolitical events and macroeconomic indicators to anticipate changes in diesel prices.
2. Diversifying investments across sectors like nuclear energy and oil to mitigate the impact of price movements in any single sector.
3. Investing in companies that can benefit from increased demand for alternative energy sources, such as natural gas or renewable energy, to hedge against potential diesel price increases.
4. Keeping an eye on global economic growth indicators, such as GDP growth rates, to anticipate changes in diesel demand.
5. Monitoring inflation and interest rate trends to anticipate changes in diesel prices and adjust investment strategies accordingly.

By staying informed about geopolitical events and macroeconomic indicators, investors can adapt their investment strategies to capitalize on potential developments in the diesel market. Diversifying investments, monitoring key indicators, and being prepared to adjust strategies based on developments can help investors navigate the dynamic diesel market and make informed decisions about their portfolios.