Diesel prices ease slightly, but several bullish factors loom large

(Kara Oosterhuis/RealAgriculture)

Farmers and ranchers have gotten pretty familiar with high diesel prices, but have likely noticed a bit of a relief from last month’s high.

Patrick DeHaan, head of petroleum analysis at GasBuddy, says the average price of diesel across Canada right now is $1.81 per litre, down from $1.88 in mid-September.

“Any decrease in the fall is something to get excited about,” says DeHaan. “This is not usually the time of year that we see diesel prices inching down.”

DeHaan attributes last year’s spike in diesel prices — especially in Eastern Canada — to tight natural gas supplies in Europe driving up demand for distillates like diesel and heating oil. With European inventories in a better position now, prices have somewhat cooled off.

This isn’t to say there won’t be challenges on the horizon, and as DeHaan notes, the wildcard that is Mother Nature remains to be a concern for the winter. If a harsh winter drives up demand, prices at the pump could jump.

Another thing that will be watched closely over the next few months, says DeHaan, are the geopolitical factors.

“I’d be watching what’s happening in the Middle East,” advised DeHaan. Tensions involving major oil producers, such as Iran, could impact global supply and prices. Economists will also monitor central bank policies — looser monetary policy stimulating demand could put upward pressure on diesel.

While renewable diesel offers opportunities for farmers, its market impact is still limited by refinery conversions challenges. However, as DeHaan explains, where incentives exist — like in California — “at least half of what California is consuming in terms of diesel is now biodiesel.” Renewables are gaining steam, but face infrastructure hurdles to broader adoption.

Check out the full conversation between DeHaan and RealAgriculture’s Shaun Haney, below:

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