Diesel prices could fall below $2 a litre in the coming months as oil prices ease, but ongoing tensions between the United States and Iran remain a major wildcard, an energy expert says.
Peter Linder, a former oil and gas analyst, said oil prices could fall to about US$85 a barrel from roughly US$90 now if tensions in the Middle East ease.
“If they start even just announcing peace discussions, oil’s going to drop $5 minimum, maybe even $10,” Linder said in an interview with CTV News Channel Saturday.
He said he expects oil prices to continue falling in the coming weeks, but the outlook could change quickly, and oil prices may go back “well over $100” if the conflict between Iran and the U.S. escalates.
He said, however, that both sides prefer to make a deal.
“My feeling is that Trump needs to make a deal,” Linder said. “Iran is definitely suffering economically. They’re not getting their exports out, or very little of it out, so they’ve got to capitulate as well.”
Diesel supply remains tight
Linder said the price of diesel has been particularly elevated because of supply and demand.
“Diesel demand is very strong and supply is very weak,” he said. “There’s just much more gasoline than diesel. Gasoline is also very expensive … but diesel is a unique product today.”
Linder said diesel prices historically tended to be lower than gasoline, but changes in refining and supply have altered the market.
“Diesel supply out of Russia has been seriously affected. Diesel supply of the Middle East has been affected,” he said.
‘It’s more downside than upside’
Linder said a number of factors could contribute to lower fuel prices in the months ahead.
The summer driving season has ended, and an announcement by European countries to release up to 100 million barrels of crude oil and diesel could put further downward pressure on prices.
Linder said lower diesel prices would have broader economic benefits because diesel is widely used to transport goods across the country.
“To me, it’s more downside than upside,” he said. “We’ve peaked, I think, on the diesel side.”
