Fluctuations in the comparative pricing of diesel and gasoline indicate the financial tradeoffs that refiners have to consider as they seek to meet product market demand. After two years of fluctuations, it seemed diesel had finally come out on top, but the arrival of driving season appears to be breathing new life into gasoline cracks.
Sustained low gasoline prices appear to have inspired additional gasoline demand. Simultaneously, moderate global economic growth is putting pressure on diesel demand and bringing gasoline and diesel cracks back together. Gasoline and diesel demand growth appears matched in the short term, and both products will take turns "driving the barrel". However, in the next few years, because of emerging economies' diesel preference, vehicles efficiency in developed regions, and IMO regulations, we expect to see the economics increasingly favoring diesel. This is already evidenced by our expectation that outside of peak summer demand months, gasoline and diesel margins will continue to be neck-and-neck this year and next.
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