Where are fuel prices headed in 2019?

December 2018/January 2019

Tyson Fisher

|

Oil and gas experts predict if diesel prices will go up, down or stabilize in the next 12 months.

Anyone who drives on a regular basis, commercially or otherwise, has probably noticed that fuel prices have been steadily increasing. Even after summer, when prices typically begin to fall, diesel has been approaching four-year highs. Is this a trend indicative of where 2019 is headed?

Trends of 2018

Before looking ahead, it is important to understand what has been occurring and why.

As of early November, average diesel prices nationwide were at about $3.30, depending on the source. At the beginning of the year, diesel was priced below $3. According to ProMiles’ numbers, the difference between Jan. 2 and Nov. 5 was about 35 cents. At the same point in 2017 the price difference was 30.6 cents higher, and in 2016 the price difference was 29.8 cents higher.

In 2015, prices decreased by more than 60 cents. However, the nation was finally rebounding from highs averaging above $4 when oil was trading at more than $100 per barrel. A global glut in the oil market began putting downward pressure on oil. By March 2016, oil was trading near $25 a barrel. That was low enough for oil-producing countries to come up with a plan to increase the price.

Price increases for oil were slow but steady. Nearly three years later, oil is trading between $70 and $80 per barrel. That partly explains the steady increase in diesel prices, even after the summer season.

Another explanation is weather-related. To start, fuel in the summer is more expensive, but not just because of all the people going on road trips and driving up demand. That is a factor, but so is the science of fuel and temperatures.

Without going through a crash course in physics, the bottom line is fuel burns differently in cold and hot weather. Compounds needed to burn cleaner in hotter weather are more expensive. Thus, summer blend fuel is more expensive than winter blend fuel. Fuel prices begin to increase around the new year as refineries begin planned maintenance, followed by preparation for production of the summer blend and then taper off as they switch to the lower cost blend, generally speaking.

According to Chris Lee, vice president of marketing at ProMiles, analysts are predicting a colder-than-normal winter in the South. For the most part, the South does not have to worry about heating. However, that may not be the case this winter. If those predictions are true, the South will drive up demand for heating gas, which will drive up the demand for oil, which will drive up demand – you get the idea.

Essentially, we have a combination of a multiple-year upward trend, a potentially colder winter in the South, and the oh-so-volatile world of the global oil market.

What’s in store for 2019?

Quick disclaimer: Nobody knows for sure what will happen to fuel prices in the long term.

However, there are several experts out there who have a better idea of where prices are headed than you and me. One such expert is Mason Hamilton, a petroleum markets analyst for the U.S. Energy Information Administration.

Hamilton referred to EIA’s short-term energy outlook report. In November’s report, EIA projected on-highway diesel prices to range from $3.14 per gallon in Q2 2019 to $3.26 per gallon in Q4 2019, with an overall average of $3.21.

That may not be as low as 2016’s $2.31 average or 2017’s $2.65 average, but it’s only two pennies more than 2018’s projected average of $3.19, suggesting prices are likely to stabilize in the next 12 months.

Lee at ProMiles mostly agrees, telling Land Line that “unless something drastic happens I feel like we are fixing to stabilize for 2019.”

Oil prices could have tilted one way or the other depending on whether or not Republicans maintained control of Congress after the midterms. As we saw, the election was essentially a push, with Democrats taking the House and Republicans gaining a stronger grip of the Senate.

“I believe that diesel will hold reasonably steady with a national average around $3.40 per gallon,” Lee said after the elections. “I anticipate a slight increase toward the middle of 2019 as debates continue over expanded exploration. I think we will see a push to make domestic production more of a worthwhile venture with WTI pushing towards $80 a barrel again.”

Hamilton pointed out that sanctions placed on Iran’s crude oil exports went into full force in November.

“The market will be watching to see how many Iranian barrels have been removed from the market and what global crude oil balances will look like as a result,” Hamilton said.

Bottom line: Barring drastic, unforeseen events, fuel prices for 2019 are looking to be mostly unchanged

on average. LL

Tyson Fisher

Tyson Fisher joined Land Line Magazine in March 2014. An award-winning journalist and tireless researcher, his news reports, features and blogs bring depth to our editorial content, backed with solid detail. Tyson is a lifelong Kansas Citian.