Thin Margins Put Diesel Retailers In The Red

August 21, 2012 10:03 AM

The US is producing crude oil at a rate around 6 million barrels per day. This is the highest output the US has enjoyed since 1998 and the resulting domestic inventory is helping to keep pump prices in check. But retailers are finding their margins on diesel fuel thinning dramatically. Retail prices hover nationwide around $3.95 per gallon. Not bad for consumers, but the retailers are paying more for their diesel than their margins can stand.

Since June 2012, diesel margins have dropped from 45cents/gallon to a meager 12cents/gallon. Wholesale prices for diesel have climbed while retail prices have remained relatively stable. This leaves retailers holding the bag.

Unrest in Sudan, Yemen and Syria slowed crude oil production in those nations by about 1 million barrels per day this year. At the same time, US and European sanctions aimed at Iran's nuclear program have not only played a role in reducing Iranian exports of crude but have also raised anxiety through Middle Eastern shipping lanes. These anxieties inflated petroleum prices during the first quarter of 2012 and although prices dipped during the second quarter, the prices of petroleum and crude oil are on their way back up.

Industry basics correlate a $1 price increase per barrel of crude to a 2.5cents/gallon uptick in the price of retail gasoline and diesel fuel. Increased domestic production of crude oil will help keep prices stable and should help ease anxieties over unrest in the Middle East. In the mean time, retailers may have to raise prices at the pump to cover their razor thin margins.


Back to news


Spell Check

8/27/2012 03:38 PM

  nearby new york heating oil is at 3.11 and the pump price is 4.09 in town, minus about .45 for road tax leaves over .50 for the wholesalers and retailers to wrangle over. I used to consistently purchase tankerloads of number 2 diesel delivered to my farm for around 10 cents over new york nearby. Since the Gulf wars this has widened steadily. Now its usually at least a 30 cent gap. Don't tell me thier not making money, I suppose the Fertilizer Industry will be crying poverty next. I live less than a days drive from the potash mines of Canada, have toured the mines and know thier main cost is Electrical power which is mostly hydro electric yet potach doubles right along with corn prices, It is all whatever the market will bear!


Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer