Inputs Forecast: Fuel Prices Higher, Could Be Volatile

Fuel prices are difficult to predict in the current political environment. There will be opportunity to lock in low prices, but the fuel market could experience volatility depending on discussions between the current administration and countries such as Saudi Arabia.

“If they [traders] feel good about the market there is nothing to worry about, but at the first hint of bad news or tension [with trade partners in the Middle East] buyers in the futures market drive prices higher, which trickles down to us,” says Davis Michaelsen, Pro Farmer Inputs Monitor Editor.

If you’re looking at farm diesel it’s also important to consider it is also used for heating oil, particularly in the Northeast. A harsh winter could push those prices higher on top of anything going on in the Middle East.

“Prices are uncertain right now,” Michaelsen explains. “We’ve been steady, and diesel has been good about taking the crude oil market in stride. Here, peak season, I’m just a penny above the July price.”

However, he says volatility could soon come into play. Certain experts are predicting $100 per barrel crude oil, which could make prices jump to $3.25 per gallon. Right now crude oil is about $75 per barrel, with farm diesel around $2.58 per gallon.

“Usually we find good opportunity to book farm diesel for spring that week between Christmas and New Year’s, plus or minus a week,” Michaelsen says. “There’s a price dip to take advantage of.”

Propane also looks like it could be higher this coming season.

“We’re looking at a propane price reset at about 20 cents higher than they have been in the past two to three years,” Michaelsen says. “There’s lot of drying this year and if the forecast comes to be with a cold winter, propane prices will reflect that added demand.”

He says prices could climb as high as $1.60 per gallon—or about 30 cents higher than today’s price. That will likely be in the middle of winter when people have immediate demand. That potential 30 cent jump in the busy season, combined with the 20 cent jump means buying at the wrong time could be a 50 cents per gallon misstep.

“We advise and propane experts advise that you keep your on-farm storage full,” Michaelsen says. “You don’t want to get where you have to order propane in the middle of the night. Calculate your needs and fill storage to the top.”

Read the rest of the Input Forecast series:

Inputs Forecast: Fertilizer Prices Increase For First Time In Years

Inputs Forecast: Resistance Could Increase Pesticide Expenses

Inputs Forecast: Get Creative To Save On Seed Costs