Fueling Economy

Quite frequently I get asked questions concerning why the price of gasoline or diesel has gone off the charts. Even with my experience in the petroleum distribution industry this can be a convoluted topic. This week I turned this question over to Glen Sokolis who had a pretty simple answer. All things considered this is not always the case with fuel pricing, so thanks Glen.


Here is a reprint of Glen’s article this week; “Fuel Prices, fuel prices where are you going?” In the fuel management business we are often asked where do we think fuel prices are going to go.  I basically tell them, if I knew that I would be long retired back when I was in my early 30’s.  The problem with fuel is so many factors effect it’s price.

Over the last several weeks we have seen diesel fuel prices increase 20 cents a gallon, gas prices increase 16 cents a gallon and crude oil go up by over $13 dollars a barrel.  Most people ask why.  We ask why.  The fuel market is crowded with supply and not enough demand yet.  Though over the last few weeks we have seen inventories go down a little but we are still swimming in fuel supply. 

The reason for the sharp increase over the past month has been a weak U.S. Dollar.  Since oil is priced in dollars on global markets, a weak dollar drives oil prices up.  The weak dollar leads investors to put cash into assets such as oil and gold to protect against the weaker dollar.  When this happens the price of oil is driven up higher not because there isn’t enough supply, it’s due to the fact more people are buying which just pushes the cost higher.

We all know why the dollar is weak, right? As a country we have been able to take the national debt from under 6 trillion dollars in 2000 to over 12 trillion dollars and growing. (You thought your credit card bill was high).  To do this we have to borrow money, as we borrow money it puts pressure on the U.S. Dollar.  With 12 trillion dollars owed and economic stimulus still being rolled out in one form or another, don’t expect the pressure to be taken off fuel in this segment anytime soon.

Glen Sokolis of Sokolis Group help to develop money-saving fuel strategies and deliver comprehensive fuel programs that will improve your company’s bottom line. Learn more at:  http://www.fuelmanagementsokolisgroup.com

Do you feel it’s okay for our government continue to give money away and devalue the dollar? I know that’s a “can of worms” type question, but how long can this go on?

Down the Road – Mike


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