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Diesel Spikes, Crude Drops as Uncertainty Shadows World Economy

July 11, 2011

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On-highway diesel prices rose sharply last week following several weeks of consistent, moderate decline, while crude oil futures settled lower.


Nationally, diesel prices rose 4.9 cents to $3.899 per gallon, according to the Department of Energy's weekly fuel price report. The Lower Atlantic region rose the most, increasing 6 cents.

The Gulf Coast, normally the cheapest and least-reactive to price changes, saw the second largest jump at 5.8 cents. For once, the Gulf Coast was not the cheapest region: Prices averaged $3.856, ahead of the Rocky Mountains' $3.838, which was also the only region to drop in price, losing 1.3 cents.

Crude, on the other hand, settled lower on Monday due to demand concerns. Chief among the issues are Chinese inflation, which hit a three-year high in June, and the European debt crisis. European officials are squabbling over Greece's second bailout package, and Italy, the Eurozone's third largest economy, is facing troubles as well.

Benchmark West Texas Intermediate crude fell $1.05 to settle at $95.15 per barrel Monday on the New York Mercantile Exchange. Brent crude, which is used to price many international oil varieties, dropped $1.09 to settle at $117.24 per barrel on the ICE Futures exchange in London.

Despite this drop in crude prices, high prices at the pump are provoking criticism of the Obama administration's recent decision to sell off emergency oil supplies. If gasoline and diesel prices are rising, the argument goes, then the emergency oil didn't work.

However, it does take some time for crude price fluctuations to work their way through the refinery system, about three weeks. The true effectiveness of the release will likely remain obscured until the oil has been refined and burned.


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