Summer Fuel Prices to be Stable If
June 1, 2012
Diesel fuel and gasoline prices this summer could hold relatively steady provided that an already tense Middle East doesn’t flare up and nothing else happens to disrupt supplies, a Purdue University agricultural economist said.
As long as market conditions remain basically as they are now, gasoline prices likely will hover between the $3.50- to $4-per-gallon mark in Indiana, with diesel prices about 25-cents higher, Wally Tyner said.
But Tyner cautions that global instability and disruptions in supply could force prices upward. As always, the political situation in the Middle East and U.S. relations with Iran will play a large part in what farmers will pay for diesel fuel and gasoline.
Supply also can be interrupted by bad weather, such as hurricanes or tsunamis, or refinery or pipeline outages – all of which can occur domestically or abroad. When supply interruptions do happen, they often temporarily drive prices up until the disruption subsides, Tyner said.
On the other hand, sluggish economic growth, an increase in crude oil production and higher-than-normal crude oil stocks could bring prices down. Recent developments in the economic crisis in Greece and an apparent slowdown in China’s economy could be important to summer’s fuel prices.
Crude oil production worldwide has increased recently beyond global demand, a situation that would drive gas prices down. As production increases, crude oil stocks build to above-normal levels, which also could cause oil prices and, therefore, fuel prices, to decrease.
If none of these situations occur, prices will remain steady, Tyner said. And it could provide an opportunity for farmers to forward contract their fall fuel needs to lock in lower prices.
“While we cannot say how any of these factors will play out in the months to come, they are the key things to watch to determine where fuel prices will go,” Tyner said. “If these factors remain pretty much as at present, fuel prices will do the same.”
Reprinted in part from Ag Answers