U.S. duty, infrastructure plans keyto keeping diesel prices down

WINNIPEG — Sinking prices for crude oil and a softer Canadian dollar have kept diesel prices relatively low for Canadian farmers this year, and they could be heading lower, as long as U.S. President Donald Trump’s infrastructure plan doesn’t get in the way.

“I would probably say in Canada you’re going to see numbers trickle lower here in the next month,” said Tom Kloza of the Oil Price Information Service in New Jersey.

As of March 21, diesel prices across the Prairies were about $1 a litre. Kloza said North America is “sort of scraping bottom” when it comes to prices for oil, gas and diesel.

One reason was the mild winter across much of North America.

However, he said the long-term bias is pointed higher, and a few months from now today’s diesel prices in Western Canada may look cheap.

He said farmers will likely be paying more for diesel during harvesting than seeding. But there is much uncertainty in the market.

The Organization of the Petroleum Exporting Countries decided late last year to reduce oil production. That lifted crude prices early in 2017, but more recently rising crude stocks in the U.S. pushed crude back below $50 per barrel.

“The problem with the OPEC cuts is they only run through the first six months of the year, and there are a lot of things in the second six months of the year that might send prices lower,” he said.

On the other hand, Trump’s pledge to put in place policies that would lead to $1 trillion of private and public money spent on U.S. infrastructure over 10 years could lead to new fuel demand that would lift diesel prices.

“Money for infrastructure usually enhances demand for diesel.”

There is another possibility as well, Kloza said.

“There is a small chance, though, that Mr. Trump and the Republican Congress might try to put through an import duty on everything, including oil prices,” he said.

That would have a drastic effect on the market, he added.

“That would raise the price of gasoline, diesel and jet fuel by 35 or 40 cents immediately.”

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