Diesel prices to soften in January, analyst says

(HuskyEnergy.com)

CNS Canada — Prices for diesel are expected to come down to between $1 to $1.10 per litre across Canada by early to mid-January, according to an oil analyst.

Prices for regular gasoline sank weeks ago, shortly after crude oil plunged on the world market. Diesel, however, remained staggeringly high and is still listed at an average price of $1.20 a litre in Canada, according to an expert.

Farm leaders in Saskatchewan and Manitoba said they didn’t understand why that was, pointing out most farm machines operate on diesel.

However, according to Tom Kloza, chief oil analyst at the New Jersey-based Oil Price Information Service, a few things made the price sticky.

“When you have a just-in-time delivery system and you have a very robust harvest, you can see prices jump up very quickly, and in this case agricultural demand for diesel really perked,” he said.

“In places like Chicago and the upper Midwest it was the worst; prices were US30 to 40 cents above world prices,” Kloza added.

Secondly, he said, in the northern reaches of North America, diesel operators were forced to put in expensive additives — “low-temperature treatments and so forth,” he said — once the cold weather set in.

However, the bulk of these factors has passed, and a “sharp downturn in prices” is coming to diesel, he said.

“I think over the next 30 days you will see it work its way through,” he said.

The price action, he said, was like a boxer who receives a body punch from Mike Tyson in the third round. “By the fifth round, you’re going to fall.”

Another factor to consider in retail diesel prices is provincial sales tax, he said, adding Alberta will almost certainly be the cheapest place to get diesel.

“It will likely be around $1” per litre, said Kozma, adding Ontario would be closer to $1.05 or $1.10.

“The drop is coming; it’s just delayed.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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