Truckers Fear Diesel Price Increases

The news has been full of the reports of the turmoil and unrest in the Middle East and the obvious impact on fuel prices for drivers.

Diesel prices have now seen an uninterrupted weekly increase for 13 straight weeks. The fuel increases are to be expected as the economic recovery takes shape and demand for fuel increases, however beyond the economic impact of the recovery (which is price inflation) there are external factors at work in boosting oil prices. The biggest price worry is how the Middle East civil unrest is going to impact future supplies.

The US has been shielded from the bulk of the risk associated with the unrest in countries such as Egypt and Libya, because most of their oil is sold to Europe. However, the US's main oil importer is Saudi Arabia and the concerns over what is happening in the tiny, neighboring state of Bahrain is creating concern in both countries and here at home.

What happens in Bahrain will have a potentially devastating affect on Saudi Arabia, despite its much greater size. The Saudi authorities have already looked to dampen down internal criticisms of how the country is governed and how the wealth is distributed, however it remains to be seen if this will be sufficient to stave off full-scale reform and unrest at home.

Uncertainty is driving the cost of oil higher – the markets do not like uncertainty and increase the price as a consequence when they see it.

The most recent increase at the pump has seen diesel jump to $3.716 a gallon, an increase of 14 cents a gallon (from the US Energy Information Administration (EIA) for the week ending February 28th).

The EIA has also reported that the increases are across the country with all nine reporting regions returning price data showing a price per gallon increase in excess of 13 cents. California has the dubious distinction of $4+ per gallon pricing, and given the continuing uncertainty over crude supplies, the rest of the country is looking forward to experiencing similar pricing too.

The $3 a gallon level was broken last October 2011, and it has kept on rising ever since (with a penny decrease in November). The MidWest is the cheapest region for gas at the moment, but with the Middle East unrest keeping crude oil prices at more than $100 per barrel, it won't be maintaining that price advantage for very long.