Diesel fuel contracting

[Kansas]

I noticed this morning that heating oil futures fell overnight to 2.42 a gallon. The local farmers coop has #2 offroad diesel delivered at 3.47. I realize their is a fair amount of lag time between the drop in a barrel of oil and when it is reflected at the pump. My question is... what should be the realistic price difference between heating oil futures and offroad diesel prices?

The reason I am asking is I want to either forward contract or prepay my diesel needs. I don't want to have offroad diesel delivered next summer at well over 4 dollars a gallon like i did at one point this last summer. I am just wondering that if the prices flatten out for a period of time,  what the price of diesel will eventually come down to.

[Ed]

IIRC, diesel is so expensive is because we export quite a bit of it to Europe. It keeps supplies tight here and prices high.

Ed

[Gary_C]

Diesel fuel remains almost a dollar over gasoline so I do not think this is the time to forward contract.

But then again, what do I know. I too have been buying hand to mouth all the way through the past price increases. 

[logwalker]

Have you considered just burning the heating oil? I always thought that they were the same product or very close. Joe

[Warbird]

Have you considered just burning the heating oil? I always thought that they were the same product or very close. Joe

My understanding is that it is illegal to do so.  Something about dyes put into the fuel or something??  Also, you'd want to research this carefully if you have one of the newer rigs with all the stuff on them for 'clean burning' and all.  Probably no danger of hurting the equipment but it is better to be safe than to harm an engine.

[Kansas]

It is my understanding that heating oil is virtually the same as #2 diesel. We dont have any heating oil around here that I am aware of. Most towns are on natural gas, and farms use propane or natural gas, if they are lucky enough to have a pipeline going by.

[Warbird]

Wait, maybe you aren't supposed to burn the automotive diesel in the boiler?  I can't remember, sorry.

*edit* Just asked some of the guys here at work.  It is apparently a State law here that you can't burn heating oil in your trucks.  It's something to do with a highway tax.

[Gary_C]

I think that fuel oil and off road diesel fuel are now the same and both contain red dye as you can buy either without paying either federal or state taxes. For past years both off road and fuel oil were allowed to be higher sulfur content, but I think that has changed to all ULSD. However diesel fuel has a minimum cetane rating and there are usually some additives in diesel fuel. And yes, you can get in big trouble if caught with red dyed fuel in your highway vehicle.

It's anybodys guess as to the future of diesel prices, but normally prices rise at this time of year and then drop in the spring after the heating season is over. This year I suspect that diesel fuel and gasoline will drop thru the winter because of the economy and I suspect that we may actually see some $60 crude oil prices this winter as the speculators have been driven out of all commodity markets.

[stonebroke]

Heating oil is still high sulfur

Stonebroke

[logwalker]

Have you considered just burning the heating oil? I always thought that they were the same product or very close. Joe

The reason I suggested heating oil is he was looking for off-road diesel. As far as I know it is legal to burn anything in off-road equipment. And if the price disparity is that large why wouldn't you do it?

[dewwood]

Our local coop does not have enough storage tanks for all of the blends so our off road diesel and home heating oil are the same.  They come from the same bulk tank.

[StorminN]

When I worked for my grandfather's small heating oil company in New England back in the late 1980's and early 1990's, the only difference between #2 on-road diesel and #2 heating oil was the red dye... when we filled up the tanker truck at the oil terminal, if we paid the road tax, they would give us a Mason jar full of red dye, and we would add it to the truck... and now we had "on-road" diesel... otherwise, there was no difference.

Nowadays, the dye situation is reversed... off-road diesel, heating oil, and #1 kerosene is dyed, and on-road #2 diesel is not... but I'd be willing to bet that all #2 fuel comes out of the same storage tank on the boat...

-Norm.

[OneWithWood]

Around here the #2 on-road diesel is dyed a light green.  I think it is to signify ULSD.

[stonebroke]

I think onroad diesel in NY  is clear. Red is offroad blue is govermnent.

Stonebroke

[tyb525]

We have a fuel oil furnace... for when the woodstove can't keep up (which is rare). We filled the tanks only halfway last year cause it was so expensive.