‘Insatiable Appetite for Diesel’ Driving Record Price Increases
Trucks and delivery vehicles that bring everything from groceries to gasoline into Montana run exclusively on diesel fuel, and with diesel at atmospheric prices, so the price of those goods will undoubtedly follow.
KGVO News spoke with Patrick DeHaan of GasBuddy on Thursday to get the latest numbers on gas and diesel.
“At least for now, diesel has seen insatiable demand,” said DeHaan. “It's the fuel that powers the economy, and as you mentioned, it's the fuel that delivers goods to your local store, whether that be the grocery or hardware store. Semi trucks power the economy by delivering goods everywhere, and the higher price of diesel is likely due to an increase in demand. Not only that, but Russian oil has generally been heavy in nature and produces more products like diesel, heating oil and jet fuel.”
DeHaan said the diesel situation is complicated by the fact that environmental standards for producing the fuel have been upgraded, leading to higher costs.
“Diesel standards have evolved over time that make it more challenging to produce,” he said. “That essentially shrinks the amount of diesel that can be used in the United States because of some of these complex and stringent rules, including the switchover to ultra low sulfur diesel, which happened about 15 years ago. That is certainly a choke point. For refineries to have desulfurization units to remove that sulfur to make the fuel as required, desulfurization capacity is extremely expensive.”
For regular unleaded gas, DeHaan said the price has increased dramatically, as well.
“The average price in Montana is now up seven cents a gallon in the last week, so the state average is now $4.34 a gallon. My goodness, I'm sure many of us would love to go back to a year ago when the price was just $2.90 a gallon, but we are on the road to higher prices and they will likely stick for some time. Average prices in Missoula are right about $4.36 per gallon. Some stations are at $4.29 some at $4.39, so there’s not a whole lot of good news this summer.”
With a bear market and a possible recession staring consumers in the face, DeHaan said such an economic slowdown could be the only thing that could possibly slow the increase in fuel prices.
“If we see a recession or if we're seeing an economic slowdown that certainly would curb consumption, and that would probably give more breathing room to refineries that have been running full tilt,” he said. “An economic slowdown is always associated with less economic activity and a loss of jobs. But it's a natural part of the business cycle, and that would likely give us more breathing room and cause prices to decline and it could also cause inventories to eventually catch back up.”
DeHaan said Gas Buddy has a membership card that could save up to 25 cents per gallon.