Farmers may want to stock up on diesel soon because the price gap between diesel and gasoline is likely to widen over the next few months, say industry analysts.
Diesel prices typically spike in the winter when demand for heating oil is at its peak, but the price disparity between diesel and unleaded gasoline last winter was a shock to truckers and drivers of diesel vehicles across Canada.
For a period in January and February, gas stations in many western Canadian markets were charging 20 to 25 cents more per litre for diesel than gasoline.
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Prices usually drop when warmer temperatures arrive, but this year the discrepancy between diesel and gasoline persisted into spring and summer.
In May, drivers in Saskatoon were paying $1.278 per litre for unleaded gasoline and $1.414 for diesel, based on data from MJ Ervin & Associates, which surveys petroleum prices in 60 Canadian cities.
Diesel prices may have stayed high because cold temperatures last winter forced utilities in eastern North American to buy record amounts of diesel fuel, depleting inventories.
The price differential finally approached parity in July, when gasoline prices in Saskatoon were $1.268 and diesel was $1.309.
Spencer Knipping, an Ontario energy ministry petroleum analyst, said the nominal price gap won’t last long. Winter is around the corner and the diesel market looks bullish.
“The demand for diesel in North America is growing more quickly than demand for gasoline,” he said, noting the health of the economy has a significant influence on diesel prices.
“With the economy growing you have more demand for goods … and I think trucks move more than 90 percent of the freight in North America.”
The boom in oil exploration in North Dakota is also a factor because the petroleum industry is heavily dependent on diesel fuel.
Knipping said refineries are shifting production to increase diesel output, but there is a limit to how much diesel they can make.
“There’s only so much diesel you can get out of a barrel of crude,” said Jason Parent, MJ Ervin & Associates vice-president.
Consequently, diesel prices rise in the autumn when the seasonal demand arrives.
“You’re likely to see diesel prices rise, relative to gasoline, starting relatively shortly,” Parent said.
Diesel consumption could decline over the longer term if the United States passes fuel economy standards for heavy-duty vehicles, Knipping said.
The proposed rules would require truck tractor manufacturers to achieve a 20 percent reduction in fuel consumption by 2018.
Canada would likely adopt the same regulations, Knipping said.
“If it happens in the U.S., it will happen here.”
