Retail diesel benchmark price resumes downward momentum

Retail diesel prices declined last week, according to the benchmark number published by the federal government, picking up on a downward trend that had taken a break the prior week. 

The Department of Energy/Energy Information Administration average weekly retail diesel price fell 4.9 cents a gallon to $3.487, a drop of 4.9 cents. 

It follows a 6 cents per gallon increase for the weekly price posted a week ago. With the latest decline, it resumes a downward trend that had seen the benchmark used for most fuel surcharges fall five consecutive weeks.

From a recent high of $3.715 a gallon on Jan. 20, the price is now down 22.8 cents.

Ultra low sulfur diesel on the CME has dropped sharply the past two weeks. On May 14, it settled at $2.2061 a gallon. The settlement Tuesday was $2.0794, a decline of 12.67 cents. Oil markets rebounded Wednesday, with ULSD settling at $2.0881 a gallon.

That fall between May 14 and Tuesday was 5.7%. But Brent crude, the world benchmark, declined only 3% during that time. 

In his weekly commentary, energy economist Philip Verleger, who has always viewed diesel as a leading indicator of not just oil markets but of economic activity, says data coming out of the diesel market is pointing toward a slowdown in economic activity.

Under a headline that referred to data on distillate consumption – diesel is a distillate and makes up about 90% of the EIA data under distillate – Verleger writes that the numbers are the “canary in the coal mine.”

He said weekly data on U.S. distillate consumption through the week ending May 16 showed a 600,000-barrel-per-day decline from a mid-February peak, which he says is extremely large by historical standards.

Verleger found a similar, disquieting decline: the period between August and November 2008, as the Great Recession was tightening its grip on the U.S.

He said some of the decline could be because earlier numbers were skewed by imports being pulled forward due to avoidance of potential tariffs. But it is not just that, according to Verleger. It also reflects “the ongoing reduction in investment activity that is not yet reflected in forecasts.”

Citing the 2008 data, Verleger said, “the drop in distillate use corresponded to the decline in real GDP.”

“Thus, we suspect the current drop in use, particularly since the beginning of March, warns of a slowdown in investment that will be reported later in 2025 and in 2026,” he wrote in the report. “This decrease will also feed back into the GDP calculations.”

Oil markets in recent weeks have been reacting not just to macroeconomic concerns driven by tariff uncertainty. They also are moving lower on the determination by OPEC+ to unwind its organization’s production cutbacks, with more than 400,000 barrels per day scheduled to come back online in June.

Additionally, OPEC+ ministers are scheduled to meet virtually this weekend and affirm another increase of that magnitude to go into effect in July.

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