Diesel Fuel Expected To Rise As Wall Street Predicts $100 Per Barrel Crude Prices

Wide-reaching energy sector experts predict the price of diesel fuel will spike before year’s, and Wall Street appears to be banking on it.

“The case for $100 oil rests on consumption that is increasingly unconstrained by Covid-19, diminishing stockpiles among industrialized nations and doubt that the Organization of the Petroleum Exporting Countries can increase production as it has promised the market,” the Wall Street Journal stated.

Reports tracking crude oil trends indicate a perfect storm may hit the trucking industry as the price of a single barrel of crude oil is expected to surpass $100. In January, the price of crude hovered at its highest price since 2014. That was right before OPEC unleashed a price war designed to bankrupt U.S. producers. Flooding the market with cheap oil sent prices at the pump into a tailspin. But after the American energy sector held on, OPEC and other major oil producers reversed their policy and prices shot up.

At the end of January 2021, the cost of a U.S. barrel ticked up by 15 percent to just over $86. The international benchmark was just above $89, also up 15 percent. Wall Street investors appear to be doubling down on oil stocks spiking because energy shares in the S&P 500 rose by 19 percent.

“The oil market is heading for simultaneously low inventories, low spare capacity, and still low investment,” a Morgan Stanley analyst reportedly stated. The market expert predicts a surge of $10 per barrel during the summer quarter that will elevate the cost to $97-$100. Goldman Sachs increased its estimate to $100, with Bank of America indicating crude could reach $120.

U.S. oil field production hit a record high in November 2019 at a stunning 12,966 barrels daily. During the pandemic, output plummeted as low as 9,711 barrels per day in May 2020. The recovery has been slow and uneven. November 2021 output hovered around 11,700 barrels, more than 1,000 less than the peak, according to the U.S. Energy Information Administration.

Price-at-the-pump analysts at Gas Buddy largely agree with the Wall Street assessment that consumers, including owner-operators, are in for a rude awakening come summer.

“The price of oil pushed into territory unseen in over seven years as (West Texas Intermediate) crude hit $88 per barrel, which continues to drag gasoline prices higher. With continued concerns over geopolitical tensions and crude oil supply, the small yet noticeable increases are likely to continue,” Patrick De Haan, head of petroleum analysis at Gas Buddy, reportedly said. “The only factor keeping gas prices from rising more substantially is that gasoline demand remains low as winter storms keep motorists closer to home. Once the weather starts to turn and warm gradually, we’ll lose the only restraint to larger price increases.”

Wild card factors that could potentially worsen diesel costs and ensuing inflation include geopolitical tensions with Russia over Ukraine, Saudi Arabia’s unwillingness to increase crude output, and a shortage of equipment for domestic oil producers to complete wells that were abandoned during the pandemic.

Sources: wsj.com, reuters.com, houstonchronicle.com, eia.gov