It's a good day to be a trucker.
While retail gasoline has surged by 25 percent this year, diesel prices have fallen by more than a quarter a gallon. The difference between the two is the smallest in almost six years and may all but disappear in two weeks' time, according to Phil Flynn, senior market analyst at Price Futures Group.
The longstanding relationship between diesel and gasoline prices, which has kept gasoline selling at a discount to truckers' favorite fuel since 2009, is unraveling under the weight of a larger-than-expected jolt to U.S. gasoline demand. The surge in consumption has bolstered prices of the motor-fuel far beyond the time they typically peak for the year.
"We're consuming gasoline and exporting it about as fast as they can make it," Flynn said in a phone interview from Chicago on Monday. "Given the way gasoline demand has rebounded, I think diesel could be even in the next week or two."
Retail gasoline has jumped almost 55 cents a gallon this year to average $2.779 a gallon on Monday, data compiled by the Heathrow, Florida-based motoring club AAA show. Diesel was down about 27 cents at $2.856 a gallon. The difference has averaged 9 cents this month, the smallest since August 2009.
U.S. refineries are processing record volumes of crude for this time of year, and yet gasoline stockpiles have fallen five out of the past six weeks. Americans are burning 9.37 million barrels of gasoline a day, the highest seasonally since pre- recession 2007.
Distillate consumption is, meanwhile, on a downswing. The spring planting season is over, curbing agricultural demand for the farming-equipment fuel, and harvesting won't start until the fall. Distillate demand averaged 3.93 million barrels a day in the four weeks ended June 12, down 2 percent from a year earlier, Energy Information Administration data show.
Gasoline's discount to diesel may widen yet again should strong prices at the pump spur refiners to boost rates and rebuild supplies. Cold weather later this year may also increase demand for heating oil, nearly identical to diesel, Will Speer, a petroleum analyst at Gasbuddy.com, said in a report on Tuesday.
"Diesel owners can rejoice for now, but if history has any say in it, your celebration will be short-lived," he said.
Diesel-powered cars grew in popularity in the late 1970s and early 1980s following the Arab oil embargo and ensuing gasoline shortages, resulting in models such as the Oldsmobile 88 and the Chevrolet Monte Carlo and Chevette that ran off the fuel. Today, it's burned largely by heavy trucks, buses and trains.
The fuel is inherently easier for refiners to manufacture because it's a direct byproduct of distilling crude. Before federal regulations forced refineries to strip more sulfur out of the fuel, "diesel was almost a junk product," Flynn said.
U.S. distillate inventories are, for now, at a four-month high. They've risen for four straight weeks to total 133.6 million barrels in the seven days ended June 12. Gasoline supplies are meanwhile near a six-month low.
And the U.S. summer driving season is only now heating up, with gasoline demand typically peaking around August.
"Every time we think gas prices are about to fall, they find a way to come back up, and it does all seem to come down to demand," Michael Green, a spokesman for the Heathrow, Florida- based motoring club AAA, said by phone on Monday. "If demand has already led to much higher prices in June, it's difficult to say what's going to happen in July and August."