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Diesel prices have held steady at a national average of $5.35 per gallon for roughly a week. Even if those prices start to fall, GasBuddy Head of Petroleum Analysis Patrick De Haan is skeptical diesel prices will fall below $5 per gallon during the winter.
Diesel inventories recently hit a 14-year low as refineries struggled to keep up with increasing demand. The market caused diesel prices to jump and invoked concern about refinery capabilities as winter approaches. The shortage is especially concerning along the East Coast, where two refineries have shut down due to a fire and the COVID-19 pandemic.
American Automobile Association (AAA) tracks diesel and gasoline prices nationwide. Prices have risen roughly 10 cents since last month's average. A year ago, diesel prices were nearly $2 cheaper per gallon, with an average of $3.64.
De Haan said if refinery capacity continues and weather cooperates, diesel prices could potentially fall to the mid- to upper-$4 per gallon range. But if things go wrong, diesel prices could push the average all-time high of $5.88 per gallon.
"It does look like by some metrics that potentially we could start rounding a corner," De Haan told Newsweek. "I would like to say we already have, but of course, I don't have a crystal ball."
The Energy Information Administration (EIA) metric for stored oil shows supply is up from its low of 25.4 days to 26 days remaining in storage. De Haan said if refineries continue to outpace consumption, the number will slowly rise, likely leading to a gentle decline in diesel prices. He called the supply-demand for diesel a "very slow-moving tug of war" that could tip in favor of either increasing or decreasing prices depending on several factors.
Refineries also don't have as much breathing room as they did prior to the COVID-19 pandemic. Many refineries reduced their production or shut down during the pandemic, and now struggle to keep up with demand. Many refineries can't afford even a small margin of error, according to De Haan. Europe's refinery capacity is down 6 percent since before the COVID-19 pandemic, and the United States' refinery capacity is down 5 percent.
"That's a significant decrease in refining capabilities," De Haan said.
De Haan said one of the biggest contributors to meeting diesel demand is weather, as central and mid-Atlantic states predominantly use heating oil in the cold months. A cold snap could lead to an increase in diesel demand, which prices would reflect.
Russia's war on Ukraine also impacts the price of diesel, as sanctions against Russia have limited the supply of oil. De Haan said even if the war ends, sanctions may not be lifted unless a new regime takes control. However, if the war ends, De Haan said it would be a "big turning point" with a "positive outcome" on diesel prices.
"A lot of Russia's products are being ignored by the global marketplace in favor of sanctions, and that's having a major impact on what we pay at the pump," De Haan said. "If the Russian war ends and sanctions end, we would have a profound improvement overnight."
However, if weather, refinery capacity and international factors all go poorly, De Haan said diesel averages could push the national all-time high of $5.88 this winter.
"The goalposts are pretty wide here on where we will go," he said.
About the writer
Anna Skinner is a Newsweek senior reporter based in Indianapolis. Her focus is reporting on the climate, environment and weather ... Read more