Seasonality & Fuel Costs

It’s currently the middle of summer and the warmest months of the year if you live north of the equator. So why are we talking about fuel costs and cold weather? The reality is that the price of diesel fuel is affected in various ways throughout each season of the year.

Let’s start by talking about the two primary types of diesel that are used throughout the year -- diesel #1 and diesel #2. Diesel #1, also called kerosene and a close relative to jet fuel, is used in extreme cold to prevent fuel waxing and gelling. Diesel #1 has a higher cetane count and higher flash point, and is more efficient than diesel #2. Diesel #1 also contains less paraffin wax which causes the clouding and gelling of fuel in cold weather. It’s also significantly more expensive to refine, which is why we don’t use diesel #1 year-round. In cold weather climates, diesel #1 is blended with diesel #2 to prevent fuel gelling. Diesel #2 has adequate cetane counts and a high enough flash point combined with a lower cost to refine which makes it the most cost-effective fuel to use in normal conditions.


If diesel #1 is more expensive, fuel prices must be highest in the winter...right? Wrong. The table below shows the average change month-to-month in diesel fuel prices from 2003 through 2020. November, December, and January (traditionally cold months) have the greatest average decrease in fuel prices. This is when expensive diesel #1 is blended with diesel #2 in cold weather climates to help trucks avoid fuel gelling.

So if we’re consuming more expensive fuel in the winter months, why does the price go down? Supply and demand is the reason. As the holidays approach we hear about everyone traveling to see family. What we don’t hear is that once we get to our destinations, we tend to commute less. According to information from the US Energy Information Administration, we consume less motor fuels in January, September, and November. From 2003 through 2020, as a nation, we consume more fuel in each of the other nine months. Thus, higher consumption of fuel causes higher costs than does the blending with more expensive diesel #1 fuel.

Source: EIA, millions of barrels per day, https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFUPUS2&f=M


When driving in the winter months, you need to be aware of weather conditions and determine if you need to purchase more expensive blended fuels in cold climates to keep your fuel from gelling. However, you will generally experience higher fuel costs in the spring and early summer months due to increased travel and greater demand for motor fuels.


In January, if you’re looking at fuel prices in Wisconsin while you’re in Texas and thinking you don’t want to fill up in Wisconsin, the cost of downtime for unthawing your gelled engine with un-blended fuel purchased in a southern state will be far more expensive than the blended fuel or a bottle of fuel additive. But in the summer months, you might find yourself paying more for fuel in a “vacation destination” region due to supply and demand. Either way, you can’t apply just one rule year-round. You have to pay attention to the weather, the markets/regions, state fuel taxes, and other variables we’ve discussed in this series to make sure you’re making the best decisions for your business and controlling your fuel-related costs.


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