Transport Topics recently published an interesting article outlining the main factors behind the recent low prices of gas and diesel. Not surprisingly, increased domestic production of crude is the main driver of this trend. We are currently in a somewhat rare period where we can observe “natural” supply and demand play out in the marketplace.

The main reason for this price trend appears to be an attractive spread between the price of crude and refined products (known as the “crack spread”). According to my interpretation of figures listed in the article, refiners should be making a profit of about $6.08 barrel, for a 6.3% profit margin. This figure is the highest since August. With margins higher, refiners are motivated to increase production, which should place further downward pressure on pricing. 

So until the price of gas and diesel fall to a point where the spread is less compelling – or Wall Street speculators go haywire about some real or imagined crisis in the Middle East and run up the price of crude – we can expect mildly lower gas and diesel prices in the short term.