Low Oil Prices Benefit Consumers, but Truckers Still Waiting for a Dramatic Drop in Diesel Costs

December 3, 2014 DATAMARK

As 2014 comes to an end, falling oil prices are bringing holiday cheer to both consumers and the companies that deliver goods across the globe.

An abundance of supply, thanks in part to growing U.S. oil production, has pushed prices down by about 40 percent this year, to about $69 a barrel. OPEC members recently voted not to cut their own production, and let prices find a bottom. Their hope is to drive U.S. shale oil producers–who have higher per-barrel break-even costs–out of the market.

On the consumer side, drivers are enjoying gas prices at around $2.30 per gallon in several U.S. states, and analysts are predicting prices could drop to below $2 in many places by Christmas.

In an interview with the Huntsville (Texas) Item newspaper, Sam Houston State University economics professor Don Freeman said falling gas prices will give consumers a significant amount of money to spend on other items–or add to their savings accounts.

“The average person around town uses about 1,200 gallons per year of gasoline,” Freeman told the newspaper. “With the drop in fuel cost, this could mean an extra $400 worth of savings.”

On the logistics side, the drop in diesel prices for truckers has not been as dramatic, according to the Supply Chain Digest.

Average diesel prices at the beginning of December were around $3.60 a gallon, down from $4 seen earlier in 2014. The decline is welcome, but it does not come close to what consumers are seeing with gasoline, SCD editors said.

“Diesel prices have been stubbornly slow to shrink on pace with declining oil prices,” the SCD editorial staff wrote. “In fact, diesel prices were rising in early November, according to U.S. government estimates.”

Still, diesel prices have the potential to fall more as oil producers wait to see where the bottom floor will settle on the per-barrel price. Some analysts see the bottom at $30 to $40, before stabilizing at$70 to $75, SCD reports.

The price drop is having an effect on the market for natural-gas-powered heavy duty trucks, according to several media outlets that cover the trucking industry.

In its report “NG Reality Check: Moving from Infancy to Adolescence,” ACT Research says lower diesel fuel prices and improved diesel engine fuel economy are tapping the brakes on the use of natural gas as fuel. ACT’s latest report is less enthusiastic about natural gas than its first study of the market, conducted in 2012.

“The previous long-term penetration over-statement does not mean NG has not grown. It has and will continue to grow, but at a slower rate the next few years.” Ken Vieth, ACT Research’s Senior Partner and General Manager said in an article posted on the ACT Research blog. “NG Class 8 truck/transit bus penetration was 3% in 2013 and should reach 4% in 2014, or about 11,000 units.”

The post Low Oil Prices Benefit Consumers, but Truckers Still Waiting for a Dramatic Drop in Diesel Costs appeared first on Outsourcing Insights.

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