Diesel Fuel:

Department of Energy Outlook for 2007 – 2008

Retail diesel fuel prices are likely to remain elevated as long as crude oil prices and world demand for distillate fuels remain high. EIA expects that national average retail diesel fuel prices will hover around $2.75 per gallon through 2007 and 2008, primarily due to the forecast for the price of West Texas Intermediate crude oil to average near $64 per barrel.

The phase-in of the U.S. Environmental Protection Agency’s (EPA) sulfurstandards for on-highway and off-highway diesel fuels has the potential to continue to influence diesel fuel prices. The logistics of delivery of ULSD to retail can be a challenge.

Most ULSD travels through pipelines on the way to bulk terminals for final transfer by tanker truck to retail stations. Other diesel fuels and petroleum products with a higher-sulfur content in the pipeline, storage, and local distribution systems might contaminate ULSD (jet fuel, for example, can have 3000 ppm of sulfur). If contaminated, it may not be possible to correct an ULSD fuel batch by blending with additional low-sulfur product, and the contaminated batch may have to be returned to a refinery for reprocessing, a difficult and expensive problem. Even without potential
delivery problems, it costs relatively more to produce ULSD fuel.