Diesel-powered RV owners are facing pump prices nearly $2 per gallon higher than a year ago, while new federal data shows the country heading into fall with unusually low commercial inventories of diesel and heating oil.
The U.S. Energy Information Administration reported a national on-highway diesel average of $5.652 per gallon on August 24. That was an increase of 19.8 cents in one week and $1.944 from the same point last year.
At $5.652, diesel is only about 16 cents below the national record of $5.810 set in June 2022.
Current diesel Class A models such as the Tiffin Phaeton and Winnebago Journey carry 100 gallons of fuel. Filling a tank that size from empty at the national average would cost about $565 today. The same fill would have cost approximately $371 one year ago, a difference of $194.
Diesel inventories drop to a record August low
U.S. inventories of distillate fuel oil, a category that primarily includes diesel and heating oil, fell by 2.2 million barrels during the week ending August 21.
According to the EIA’s latest Weekly Petroleum Status Report, commercial inventories dropped to 103.4 million barrels. That was 14% below the five-year seasonal average and 9.5% below the same week last year.
Historical EIA inventory records show it was the lowest late-August reading in the weekly series, which began in 1982.
It was not the lowest absolute inventory ever recorded. Stocks briefly fell to approximately 100.8 million barrels in late May before recovering during June and July.
Low inventories don’t necessarily mean fuel stations are about to run dry. They indicate that the country has a smaller cushion if production declines, exports increase, or another disruption affects the global fuel market.
Refineries are already running hard
The inventory decline did not occur because American refineries were sitting idle. In fact, refineries operated at 97.4% of capacity during the latest reporting week. Distillate exports also increased from 1.6 million to 1.79 million barrels per day.
Domestic distillate demand, measured over the latest four weeks, was actually 2.2% lower than during the same period last year. Falling inventories cannot be explained by unusually strong U.S. demand alone.
Global conditions are also pulling on the American diesel market. The EIA has attributed tight supplies of refined petroleum products to lower exports from Russia, disruptions affecting refineries and shipping in the Middle East, and reduced refinery activity in China.
Another sign of the strain appeared on August 17, when the benchmark U.S. diesel crack spread exceeded $100 per barrel for the first time, according to Reuters. The measure tracks diesel’s premium over crude oil. Its record high shows that the current pressure is concentrated in refined fuel, even as American refineries have a strong financial incentive to produce more of it.
Why fall could keep pressure on diesel prices
Several seasonal pressures will arise over the next few months.
Farmers use more diesel during the fall harvest, while colder weather increases heating-oil demand, particularly in the Northeast. Refiners also commonly schedule maintenance after the summer driving season.
Its August outlook forecasts reduced refinery activity during September and October. Crude oil inputs are expected to fall below 16 million barrels per day on average in October, resulting in less production of gasoline, diesel, and other petroleum products.
Those conditions could keep diesel prices elevated or leave them vulnerable to another increase if the market suffers an additional disruption.
A further price spike is not guaranteed. The EIA expects crude oil prices to begin declining during the fourth quarter as international oil shipments gradually recover and global inventories begin rebuilding.
No federal data shows that retail stations are about to run out of diesel. The concern is that unusually low inventories provide less protection against refinery outages, rising exports, or another disruption to global fuel supplies.
Diesel is already close to its record price. Heading into the fall with the lowest late-August inventories in more than four decades leaves little room for another problem.
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