Diesel price declines forecast to continue into 2023

Quimby Mug Bayou Florida Headshot
trucks at a fuel island

In something akin to a gesture of holiday good will, diesel prices at the pump have continued to drop and analysts expect 2023 to bring more of the same.

According to AAA, the average price per gallon for diesel on Friday in the U.S. was $4.80, down nearly 20 cents from a week prior and down 55 cents from last month’s average.

A drop in Brent crude oil prices, decreases in wholesale and retail margins along with increased refinery output continues to chip away at historically high prices.

Tom Kloza, head of energy analysis at Oil Price Information Service, expects the downward trend to continue, particularly in the spring following a rough year of high prices.

“Diesel prices have some upcoming anniversaries that are quite staggering,” Kloza said. “In 2022, January was ushered in with street prices around $3.63 per gallon and February saw a $3.89/gal average. Post Ukraine invasion we saw sequential prices (March through December) of $5.08/gal; $5.52/gal; $5.74/gal; $5.55/gal; $5.08/gal; $4.98/gal; $5.17/gal; $5.31/gal and $4.99/gal (December so far).

EIA Diesel Price ChartA chart released recently by the U.S. Energy Information Administration forecasts a decline in diesel prices for 2023.U.S. Energy Information Administration

“I expect that diesel is quite expensive on a year-on-year basis in January and February, but prices in most other months should be $1/gal or more beneath the numbers endured in this wild 2022,” Kloza continued.

Patrick De Haan, head of petroleum analysis at Gas Buddy, expects “a noticeable improvement in supply and high refinery runs” to continue to bring down diesel prices.

“For now I think there's plenty of room for diesel prices to keep declining. How long that extends into 2023 is a bit uncertain, but for now I'd say there's a drop of roughly 40 to 80 cents per gallon still coming,” De Haan said.

In its latest short-term energy outlook issued last week, the U.S. Energy Information Administration changed its forecast from November with “Brent crude oil price forecast averaging $92 per barrel in 2023, $3/barrel less than we had forecast last month.”

The report goes on to say that “a slight contraction in the U.S. economy and refinery maximization of distillate fuel production will reduce distillate prices” in the first half of 2023. EIA expects U.S. diesel refining margins to fall by 19% in 2023 compared with 2022.

Kloza also sees diesel margins dropping in 2023.  

“Right now, we find street prices for diesel at extremely hefty margins to wholesale costs, but those should come down to where diesel largely moves for less than $4.25/gal at retail with considerably lower numbers available to fleets that buy on cost-plus basis,” Kloza said. 

The EIA's Dec. 6 report also takes into account ongoing global factors such as the EU’s ban on seaborne imports of petroleum products from Russia which "creates supply and price uncertainty for distillate markets in early 2023."

The Attachments Idea Book
Landscapers use a variety of attachments for doing everything from snow removal to jobsite cleanup, and regardless of how often they are used, every landscaper has a favorite attachment.
Attachments Idea Book Cover