Crude Price Pushes Fuel Higher
Diesel Average Hits $4.497 After 16.6¢ Rise
By Dan Leone, Staff Reporter
This story appears in the May 26 print edition of Transport Topics.
The average retail diesel price continued its meteoric rise last week, surging another 16.6 cents to a record $4.497 a gallon, according to the Department of Energy.
Further price increases at the pump seem all but certain as crude oil soared as much as $11 a barrel between May 15 and May 22, briefly rising above $135 for the first time.
“There’s no hope for diesel be-cause crude is up so high,” Mary Novak, an energy analyst with Global Insight, told Transport Topics.
Record crude prices have tempered diesel demand in North America and Europe but are doing little to reduce consumption in “emerging economies” such as China and India, she said.
That means “diesel prices effectively can’t correct,” Novak said.
The diesel increase last week followed an 18.2-cent spike the previous week, which was the largest one-week gain since October 2005, DOE said.
The combined jump of 34.8 cents raised trucking’s diesel fuel bill by $254 million in just two weeks, based on an estimated burn rate of 730 million gallons of diesel a week.
Diesel has gained 54.2 cents thus far in the second quarter of 2008, compared with 58.8 cents during the first quarter, leaving it $1.694 a gallon higher than in the corresponding week of 2007.
The average retail gasoline price hit a record $3.791 a gallon last week following a 6.9-cent gain, DOE said after its May 19 survey of fueling stations. It was the eighth straight record and the ninth increase in 10 weeks, totaling 56.6 cents.
Gasoline is 57.3 cents higher than a year ago, DOE said.
Less-than-truckload carrier Jevic Transportation last week cited high fuel prices as the main reason it decided to cease operations. (Click here for related story).
An executive with a refrigerated carrier also felt the pain from record fuel prices. He said his company was barely “treading water” as rapid price increases continued to eat into the company’s fuel surcharges.
Mark Campbell, vice president of finance for H.F. Campbell and Sons, Millerstown, Pa., said that through April, surcharges were covering only 70.2% of its fuel bill, compared with almost 97% in 2006.
H.F. Campbell alters its fuel surcharge each Monday, he said, but there could be a lag up to an additional seven days before it takes effect.
Campbell said the company has tried to offset some of the additional expenses by lowering the maximum speed on the carrier’s 55 trucks in March to 66 mph from 71 mph and installing auxiliary power units.
The APUs have helped cut idling costs to about $1,000 a month from $3,600 a month, Campbell said.
Lower tractor speeds and the resulting boost in fuel economy of about 0.5 mile per gallon could save the company about $417,000 a year.
“That sounds great on the surface, but the reality is . . . that $417,000 isn’t going to account for the loss we had last year,” Campbell said.
Crude oil, the main factor behind the record fuel prices, continued its own record run last week. Prices on the New York Mercantile Exchange topped $135 a barrel during intraday trading on May 22, before closing at $130.69.
The price has more than doubled in the past year, and the intraday record of $135.09 was $10.97 higher than the closing price a week earlier.
The cost of crude oil is the biggest factor in determining the retail price of diesel, accounting for about half of what truckers pay at the pump, according to DOE’s Energy Information Administration.
On May 19, President Bush signed legislation to halt shipments of crude oil to the U.S. Strategic Petroleum Reserve, the White House said. About 70,000 barrels of oil are normally shipped to the SPR each day.
Bush approved the SPR moratorium several days after he met with the Saudi Arabian government, which agreed to boost oil output by about 300,000 barrels a day, beginning in June.
Bush expressed disappointment in the decision, saying it was “not enough” to influence U.S. retail prices, news services reported.
Total U.S. stockpiles of crude oil, excluding the content of the SPR, fell to 320.4 million barrels in the week ended May 16 from about 325.8 million barrels in the prior week.
Year-over-year, crude oil stocks are down 23.8 million barrels, DOE said.
“Supply is having a very hard time catching up,” Novak said. “Some of our oldest reservoirs, both in non-OPEC and OPEC countries, are starting to decline, and the decline is a little faster than expected.”
Despite the record fuel prices, oil executives defended their record profits last week during congressional hearings.
In a May 21 Senate hearing, executives blamed the records on supply and demand, and they spoke against passing new taxes on the oil industry.
They also defended their companies’ profits, outlining how much they are investing in future supplies.
The oil executives then testified on the House side on May 22, a day after Rep. Edward Markey (D-Mass.) released a report on how oil companies had used profits in recent years to increase executive pay and buy back their own shares.
This story appears in the May 26 print edition of Transport Topics.
The average retail diesel price continued its meteoric rise last week, surging another 16.6 cents to a record $4.497 a gallon, according to the Department of Energy.
Further price increases at the pump seem all but certain as crude oil soared as much as $11 a barrel between May 15 and May 22, briefly rising above $135 for the first time.
“There’s no hope for diesel be-cause crude is up so high,” Mary Novak, an energy analyst with Global Insight, told Transport Topics.
Record crude prices have tempered diesel demand in North America and Europe but are doing little to reduce consumption in “emerging economies” such as China and India, she said.
That means “diesel prices effectively can’t correct,” Novak said.
The diesel increase last week followed an 18.2-cent spike the previous week, which was the largest one-week gain since October 2005, DOE said.
The combined jump of 34.8 cents raised trucking’s diesel fuel bill by $254 million in just two weeks, based on an estimated burn rate of 730 million gallons of diesel a week.
Diesel has gained 54.2 cents thus far in the second quarter of 2008, compared with 58.8 cents during the first quarter, leaving it $1.694 a gallon higher than in the corresponding week of 2007.
The average retail gasoline price hit a record $3.791 a gallon last week following a 6.9-cent gain, DOE said after its May 19 survey of fueling stations. It was the eighth straight record and the ninth increase in 10 weeks, totaling 56.6 cents.
Gasoline is 57.3 cents higher than a year ago, DOE said.
Less-than-truckload carrier Jevic Transportation last week cited high fuel prices as the main reason it decided to cease operations. (Click here for related story).
An executive with a refrigerated carrier also felt the pain from record fuel prices. He said his company was barely “treading water” as rapid price increases continued to eat into the company’s fuel surcharges.
Mark Campbell, vice president of finance for H.F. Campbell and Sons, Millerstown, Pa., said that through April, surcharges were covering only 70.2% of its fuel bill, compared with almost 97% in 2006.
H.F. Campbell alters its fuel surcharge each Monday, he said, but there could be a lag up to an additional seven days before it takes effect.
Campbell said the company has tried to offset some of the additional expenses by lowering the maximum speed on the carrier’s 55 trucks in March to 66 mph from 71 mph and installing auxiliary power units.
The APUs have helped cut idling costs to about $1,000 a month from $3,600 a month, Campbell said.
Lower tractor speeds and the resulting boost in fuel economy of about 0.5 mile per gallon could save the company about $417,000 a year.
“That sounds great on the surface, but the reality is . . . that $417,000 isn’t going to account for the loss we had last year,” Campbell said.
Crude oil, the main factor behind the record fuel prices, continued its own record run last week. Prices on the New York Mercantile Exchange topped $135 a barrel during intraday trading on May 22, before closing at $130.69.
The price has more than doubled in the past year, and the intraday record of $135.09 was $10.97 higher than the closing price a week earlier.
The cost of crude oil is the biggest factor in determining the retail price of diesel, accounting for about half of what truckers pay at the pump, according to DOE’s Energy Information Administration.
On May 19, President Bush signed legislation to halt shipments of crude oil to the U.S. Strategic Petroleum Reserve, the White House said. About 70,000 barrels of oil are normally shipped to the SPR each day.
Bush approved the SPR moratorium several days after he met with the Saudi Arabian government, which agreed to boost oil output by about 300,000 barrels a day, beginning in June.
Bush expressed disappointment in the decision, saying it was “not enough” to influence U.S. retail prices, news services reported.
Total U.S. stockpiles of crude oil, excluding the content of the SPR, fell to 320.4 million barrels in the week ended May 16 from about 325.8 million barrels in the prior week.
Year-over-year, crude oil stocks are down 23.8 million barrels, DOE said.
“Supply is having a very hard time catching up,” Novak said. “Some of our oldest reservoirs, both in non-OPEC and OPEC countries, are starting to decline, and the decline is a little faster than expected.”
Despite the record fuel prices, oil executives defended their record profits last week during congressional hearings.
In a May 21 Senate hearing, executives blamed the records on supply and demand, and they spoke against passing new taxes on the oil industry.
They also defended their companies’ profits, outlining how much they are investing in future supplies.
The oil executives then testified on the House side on May 22, a day after Rep. Edward Markey (D-Mass.) released a report on how oil companies had used profits in recent years to increase executive pay and buy back their own shares.
