Since the ease of the hurricane season, oil prices have fallen $9 a barrel from the record high of $55 a barrel. The last supply numbers however include ominous signs that price is likely to increase. With winter quickly approaching demand is likely to increase slightly and with production levels at only 1% above demand levels any increase in demand is likely to have proportionate effects on price.
In the latest report by the U.S. Department of Energy said that stockpiles of crude oil rose by 800,000 barrels. However, heating oil and diesel fuel fell by 1 million barrels or 14% below year ago levels. This is why diesel prices are often higher then gas prices at local gas stations.
Diesel fuel prices have soared above $2.10 a gallon up 60 cents from a year ago. U.S. Economic growth has contributed to part of this increase. U.S. consumers have been spending more and many of their purchases are contributed to higher imports. In fact, there has been a 15% increase in imports. Trains and trucks are packed full. Interstate commerce has had their hands full the last couple months and it is taken a toll on the diesel fuel supply.
Oil Traders have been keeping a close watch on oil supplies. Princeton University’s geologist Kenneth Deffeyes predicts global output will reach its limit by late next year and then gradually begin to decline. As price to sustain such production begins to divert consumers, demand will have to fall.
In the more immediate future, other suppliers of oil such as Yukon in Russia, and Nigeria both have political pressures that at any time could cause problems in the business cycle. Any reduction in supply would greatly impact price anywhere from fifty on up per barrel.