Diesel Average Climbs Above $3 After 7.6¢ Increase

This story appears in the April 12 print edition of Transport Topics.

The average price of retail diesel across the nation rose 7.6 cents to $3.015 a gallon last week, topping the $3 mark for the first time in 17 months, according to the Department of Energy.

At the same time, the gasoline price average rose 2.8 cents to $2.826, its highest level since October 2008, DOE said after its April 5 survey of fueling stations.

Both diesel and gas have risen in six of the past seven weeks. The latest gain for diesel was the steepest since an identical increase on Feb. 22, according to DOE data.

A year ago, with the nation still mired firmly in recession, diesel cost $2.228 a gallon on average, while retail gasoline cost $2.037.

A petroleum analyst said fuel prices are riding a wave of economic optimism and that they may have reached “a higher plateau.”

“I think most of the price rise we saw was in response to economic news that looked a little bit better,” said Bruce Gress, director of petroleum risk management for truck-stop chain Pilot Travel Centers. “There are a number of people out there that believe demand is going to come back strong with the economy.”

Two trucking company owners said that as fuel prices creep higher, they are educating their drivers on fuel conservation and better driving techniques.

“We have training with new drivers to teach them progressive shifting,” said Bill Strimbu, president of flatbed hauler Nick Strimbu Inc., Brookfield, Ohio.

The company’s engine supplier takes care of most of this training, Strimbu said.

“They instruct the drivers to shift at a lower [revolutions per minute] and operate in the cruise control mode as much as possible.”

Strimbu, whose company runs about 130 trucks, primarily east of the Mississippi River, said that the driving techniques can result in fuel savings of between 10% and 15% fleetwide.

Rick Robinson, president of truckload carrier Robinson Transport Inc., Columbus, Ohio, said his company has set in place aggressive idling-reduction policies.

“Our longhaul, over-the-road trucks were idling 30% to 50% of the time before we started installing” auxiliary power units, Robinson said. “Now, they idle 1% of the time.”

The savings from the APUs alone are “tremendous,” Robinson said.

“When the trucks were idling, our drivers would bump them up to 1,000 rpms, burning 1.25 to 1.5 gallons of diesel an hour. APUs burn two-tenths of a gallon per hour.”

Robinson Transport has hard-wired its anti-idling policy into its trucks’ engines. No truck in the fleet can idle for more than 15 minutes without automatically powering down, Robinson told Transport Topics.

Meanwhile, DOE said in its latest short-term energy outlook that the U.S. diesel average is likely to remain near $3 a gallon throughout this year and next year.

DOE said it expects diesel to average about $2.97 this summer, an increase of 51 cents a gallon compared with last summer.

For all of 2010, it predicted an average price of $2.95 a gallon, rising to $3.12 for 2011.

DOE also forecast that gas would average $2.84 a gallon this year and $2.96 a gallon next year. Summer gasoline will average $2.92 a gallon, compared with $2.42 a gallon last summer.

In a separate report, DOE said stockpiles of distillate fuel, which includes diesel, rose to 145.7 million barrels in the week ended April 2, from 140.8 million barrels in the corresponding week of 2009.

Crude oil futures on April 6 were trading at $86.84 a barrel on the New York Mercantile Exchange, the highest price since Oct. 8, 2008, Bloomberg News reported.

“We had been trading in a range on crude from $78 to $82 for an extended period, and now we’ve broken through that,” Pilot’s Gress said.

Nevertheless, he said, he thinks that crude and refined fuels will be insulated in the near term from big price swings.

“I see a lot of pressure keeping this from going too far up or too far down,” Gress said.

Demand, he added, is still fragile enough to be hurt by a sudden increase in prices.

“I don’t see it exploding to the upside, and I don’t see it sagging way, way down,” he added.