As we get closer to the spring planting and summer driving seasons, what will that mean for fuel prices? Patrick DeHaan, head of petroleum analysis with GasBuddy, says that depends on a lot of factors, including the possibility of a tariff war. How soon would consumers feel the impact of tariffs on fuel prices?
“Well, it probably will take some time. Due to the nature of futures contracts and how long it takes oil to get into the United States and to be refined, we’re probably looking at an impact of two to three weeks, if not a little bit beyond that, but a lot of uncertainty between now and then is over the state of the U.S. economy. Will tariffs continue through the next several weeks? Will it soften the economy to a point where demand is going to drop considerably? That’s a wild card that could potentially offset part of the impact that would cost consumers more in terms of tariffs, so there are a lot of uncertainties.”
Even without tariffs, there will be some movement ahead for fuel prices.
“There’s going to be movement in prices over the next few weeks, but very little of it will be due to tariffs. There’s also the time of year when complexities due to seasonal factors start to impact prices as well. So, generally speaking, diesel prices will start to moderate in the weeks ahead as demand softens after the heating oil season concludes, whereas gasoline prices are likely to continue marching higher as we start to transition to a more expensive blends of gasoline and demand goes up.”
Trade tensions bring price volatility. DeHaan talks about the possibility of increased sales opportunities for domestic biofuels.
“Oh, potentially, but again, this is something that would have had to be planned to be able to execute well on it. Americans drive the same cars they did yesterday. They generally need the same fuels as they did yesterday. While there is the possibility of using more things like ethanol, as you certainly are well aware, farmers not going to go out and buy a different combine tomorrow that’s based on a different type of fuel, and considering that ethanol is relatively a newcomer to the ag sector potentially replacing diesel, so a lot of complex questions that are very potentially convoluted based on whether or not the tariffs will be around in the next few weeks.”
The on-again, off-again nature of tariffs means fuel prices can be a minefield to navigate.
“I think the biggest question is how long the market expects these tariffs to continue. I don’t see any end users making large snap decisions yet. I think we’re going to see how the situation plays out before we start to see some more major decisions made on how to react.”