Quiet diesel market awaits potential tariff impacts on Canadian oil

For a market that has been muted in its up-and-down swings, there have been plenty of movements playing out in the background that ultimately may have a larger impact on the price of oil and by extension the price of diesel.

The lack of movement in the diesel market was driven home Tuesday by the latest release of the Department of Energy/Energy Information Administration average weekly retail diesel price. It roseby 1.2 cents a gallon to $2.677, meaning that in the past three weeks, the price has moved just 1.8 cents a gallon. That price is the basis for most fuel surcharges. 

However, the overall picture is one of slow upward creep. The DOE/EIA price has moved up seven of the past eight weeks. The latest price is just over 20 cents a gallon higher than it was on Dec. 23, with most of the upward move coming after the outgoing Biden administration slapped on tighter sanctions against Russian oil shipments. Market reaction to that move in early January was an expectation that the sanctions had teeth and could restrict Russian supplies to the market.

In the futures market, where the road to whatever is set at the pump begins, volatility also has been limited. Although there have been some big intraday movements, they have tended to offset each other. For example, a more than 6-cent rise Feb. 11 in the price of ultra low sulfur diesel (ULSD) was followed a day later by an almost identical downward move.

The end result is that ULSD settled Feb. 7 at $2.4308 a gallon. On Tuesday, the settlement was $2.4406, almost exactly 1 cent apart.  

Contrast that with the market between July 8 and Sept. 16, 2024, when the DOE/EIA price declined from $3.865 a gallon to $2.525. Or the movement between July 10, 2023, and Sept. 18 of that year, when prices climbed to $4.633 a gallon from $3.806.