Diesel Price Decline Slows

January 5, 2009

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Diesel prices are still falling, although the rate of decline has slowed. Energy Information Administration figures released Monday show the average price of a gallon of diesel to be $2.291, down 3.6 cents from last week.

The previous week, prices fell 3.9 cents per gallon, 5.6 the week before that, after drops of between 9 and 21 cents per gallon each week except one since the first week in October.

This week's average was lower than it's been since May 30, 2005, when it hit $2.16 per gallon.

The highest prices this week were again reported in the New England region, at $2.596, with the lowest in the Rocky Mountain region at $2.215.

Crude oil rose to a three-week high on the New York Mercantile Exchange Monday, reported Bloomberg. Oil for February delivery rose $1.98, or 4.2 percent, to $48.32 a barrel at the closing of the exchange. The contract briefly went as high as $49.28 a barrel, the highest since Dec. 15. Bloomberg attributes the increase to speculation that the conflict in the Gaza Strip may spread and disrupt oil supplies from other parts of the Middle East, a well as signs that OPEC production cuts are being implemented.

Meanwhile, the Houston Chronicle reported last week that refiners are taking steps to boost production of diesel fuel, which is expected to be in higher demand around the world in coming years.

Refineries in the U.S. have traditionally been geared to produce gasoline primarily, with diesel as sort of a byproduct. This fact has helped contribute to the price premium diesel currently commands over gasoline.

Exxon Mobil, the Chron reports, is the latest major refiner to reveal plans to increase diesel output, following moves by Valero Energy, Motiva and Marathon Oil. Exxon Mobil will spend more than $1 billion to upgrade facilities here and abroad, which will boost its worldwide diesel production by about 10 percent.

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