Diesel, Gas Prices Jump 5%, Could Hit $5 by Summer

U.S. diesel prices jumped 4.6% in the past four weeks and experts predict they will continue to climb higher as oil refineries in the Northeast and elsewhere shut down.

The average price on February 13, 2012 in the U.S. was $3.943, according to the U.S. Energy Information Administration.  As of March 12, the most recent date for which nationwide figures are available, it was $4.123, a 4.6% increase.  A gallon of diesel cost $2.90 in September 2010.

Meanwhile, gasoline prices increased 8.6% over the same period, moving from $3.523 to $3.829 per gallon.

In commodities markets, the price of one gallon of gasoline closed at a ten-month high of $3.3569 on Friday and gasoline futures on the New York Mercantile Exchange are already up 22% this year.

In January, Hovensa, one of the world’s largest oil refineries, announced plans to close following a $1.3 billion loss attributed to weak demand and high operating costs.  Hovensa is a joint venture of Hess, a U.S. oil company, and Petróleos de Venezuela, that country’s state owned oil company.  It will continue to operate as an oil storage facility.

Refineries in the Northeast have either been idled or shut down permanently, also due to losses.  Sunoco, one of the country’s largest refiners, announced plans recently to close a major refinery in that region in July.  This move will take as much as 335,000 barrels per day off the market, based on that refinery’s production capabilities.

These refineries don’t have access to much of the crude oil produced in the Midwest because there is an insufficient number of pipelines.  As a result, they import more oil from overseas. In the meantime, the U.S. Department of Energy has warned of a potential shortfall could develop this summer as early as July in the Northeast and, as a result, prices of both diesel fuel and gasoline could easily hit the $5 per gallon mark by July.