For those in the transportation industry, the past year has been challenging when it comes to diesel fuel. Due to a variety of factors, the price of diesel shot sky-high, putting pressure on logistics carriers’ budgets. As a result, many in trucking and supply chain transport are asking whether relief is in sight. In other words, will the price of diesel eventually return to pre-pandemic levels, or will diesel fuel supplies remain limited? With this in mind, the following offers some insights regarding the diesel fuel forecast for 2023.
Looking Backwards to Predict the Future
In order to know where we’re headed, it’s important to know where we’ve been. By examining the key factors that drove diesel fuel prices up in 2022, we can evaluate whether they’ll persist. In this regard, it’s clear that the pandemic is continuing to play a role in limiting diesel fuel supplies. Logistics supply chains have yet to regain pre-pandemic efficiencies. Likewise, refineries have still not fully recovered. On top of this, the East Coast permanently lost a major refinery due to a fire at Philadelphia Energy Solutions, which had previously accounted for a third of the East Coast’s diesel fuel supplies. Whether other refineries can fill the void will certainly affect the diesel fuel forecast this year.
In addition to the pandemic and catastrophes affecting diesel fuel supplies, the Russian invasion of Ukraine also had an impact. By June of 2022, diesel prices had climbed to $5.81 a gallon. The sudden withholding of fuel from Russia combined with boycotts further limited supplies and drove up prices. And while most countries are no longer highly dependent on Russian energy, supply constraints persist. As a result, diesel fuel prices have dropped some but not to the levels seen prior to the invasion of Ukraine. While this suggests the diesel fuel forecast is trending to a more favorable situation, it isn’t likely to return to its baseline of several years ago.
A Year of Persistence
Current diesel fuel prices are hovering around $4.60 to $4.75 a gallon. This is definitely an improvement over its peak prices in 2022, but it’s not likely to fall significantly lower in the months to come and may actually slightly increase. Several reasons account for this diesel fuel forecast. First, existing diesel fuel supplies in the U.S. remain significantly low. The U.S. distillate stock, which includes diesel fuel, is 28 million barrels below its 5-year average. Second, Europe has successfully weaned itself away from Russian fuel, but that has increased demand for other diesel fuel supplies. This rising demand for other diesel fuel refineries is also expected to keep diesel fuel prices elevated.
Many refineries put off maintenance and repairs during COVID for obvious reasons. Then, in 2022, they delayed them again in an effort to recoup profits from the year before. This means that many refineries will be attending to repairs and maintenance in 2023, which means significant downtime. And downtime will further restrict diesel fuel supplies and keep costs elevated. Thus, the diesel fuel forecast for the coming months does not support a significant drop in costs based on these factors. It seems we are still playing catch-up from the effects of the pandemic and other global events.
Baby Steps Back to the Norm
While 2023 is not likely to see diesel fuel prices drop significantly, there is still hope for the future. Once maintenance and repairs are completed in 2023, refineries will be better equipped to ramp up production. Likewise, supply chains and logistics will progressively improve as well, assuming another pandemic doesn’t occur. And opportunities for alternative energy and enhanced energy efficiencies in the transportation sector will evolve. The diesel fuel forecast for the short term may not be great, but the longer-range picture is hopeful.