By Jonathan S. Reiskin, Associate News Editor This story appears in the Feb. 24 print edition of Transport Topics.
Bitter winter weather in much of the United States drove up diesel, crude oil and gasoline prices again last week, with all hitting their highest levels in at least four months, analysts said.
The U.S. retail diesel average gained 1.2 cents a gallon to $3.989 on Feb. 17, the fourth straight weekly gain, the Department of Energy reported. The cumulative rise amounts to 11.6 cents a gallon and leaves the diesel average at its highest point since April 1. A year ago, trucking’s main fuel cost $4.157.
DOE’s Energy Information Administration also said the average price for regular gasoline shot up by 7.1 cents a gallon to $3.38, the second straight increase. In the corresponding week a year ago, gas cost $3.747 on average. The current price is the highest since Sept. 30, when it was $3.425.
Crude oil futures on the New York Mercantile Exchange topped $103 a barrel Feb. 19, the highest level since Oct. 8.
“Refined product supplies are being drawn down by better demand, especially diesel,” said Ben Brockwell, director of data and pricing for the Oil Price Information Service. “At root, what we’re seeing is driven by fundamental issues of supply and demand.”
Diesel for trucks is very similar chemically to home heating oil. The cold in New England and the mid-Atlantic states has left truckers to compete over distillate stocks with people and businesses in need of heat, Brockwell said. The competition is exacerbated, he said, because businesses and people are buying oil to supplement falling natural-gas supplies.
While natural gas in the ground remains plentiful, the trade association America’s Natural Gas Alliance has said storage facilities for gas, once extracted, are not as voluminous as are crude repositories.
“Continued draws of distillate inventories have been supporting prices, and this trend is likely to continue over the next few weeks as another blast of cold air hits the Northeast,” Andy Lipow, president of Lipow Oil Associates in Houston, told Bloomberg News.
Pricing on oil markets suggests that cold in the United States is the big issue. Barrels on the Nymex — linked to Cushing, Okla., prices — have been rising in price more rapidly than Brent crude traded in London, which has been more stable.
Nymex crude closed at $102.92 a barrel Feb. 20, rising steadily since a close at $91.66 on Jan. 9. In contrast, Brent has percolated between $108.60 and $110.50 a barrel from Feb. 7 to Feb. 19.
The strain on diesel prices did not reach Phoenix, where an executive with J&L Transportation said fuel prices have been stable.
“Movements up or down within a penny have been common,” said Larry Woolson, the intermodal carrier’s special projects director. He said sharp volatility usually is the most damaging aspect of diesel prices.
Woolson said he remembers paying 12 cents a gallon for diesel in Mexico when the U.S. price was “a buck a gallon.” While he considers the current prices to be very high, the moment of stability at least makes it easier for him and his colleagues to make plans.
J&L has 30 power units, which burn about 7,500 gallons a month, he said. The company works the rail yards near Phoenix and provides drayage within the metropolitan area and throughout Arizona.
The start-stop nature of the work produces miles-per-gallon figures that would be “embarrassing for an over-the-road carrier,” he said. Still, J&L governs its top engine speed, limits engine idling and monitors fuel usage carefully.
