Diesel Average Drops 11.6¢ To Lowest Since Jan. 2011

This story appears in the Dec. 22 & 29 print edition of Transport Topics.

The U.S. retail diesel average continued its downward push last week, plummeting 11.6 cents a gallon to $3.419, the lowest since January 2011, the Department of Energy reported.

The drop is the largest weekly decline since November 2008, when the nation was tumbling into recession.

The latest figures from DOE mean the diesel average has dropped more than 60 cents a gallon this year since reaching a high of $4.021 in March.

Almost half of that 60-cent drop has occurred in the past two months.

While the average diesel price is 45 cents less than it was a year ago, gasoline’s price fall has been even greater.

Gasoline shed 12.5 cents a gallon last week to reach $2.554, down nearly 70 cents from December of last year. In the past two months, gasoline has fallen back more than 65 cents.

Fuel prices have been plunging since June, driven by the large supply of crude oil globally, a situation that accelerated in November when OPEC decided not to cut production in hopes others, particularly the United States, would cut production.

“It’s really a game of chicken, the hope that some of the production will come off line,” said Sean Hill, an analyst with DOE’s Energy Information Administration.

“Typically, in a market that drops like this, you would see Saudi Arabia, the biggest producer of crude oil, cut production to balance the market,” said Ben Brockwell, director of data and pricing for Oil Price Information Service.

The oil glut, plus growing numbers of fuel-efficient trucks and cars on the road, has created a powerful, two-pronged thrust that’s keeping crude and, thus, diesel prices, down, Brockwell said.

Crude closed on the New York Mercantile Exchange on Dec. 18 at $54.11 a barrel — a five-year low and a 50% drop since its high of $107.26 in June.

For Ed Lewis and fleet owners like him, falling diesel prices present the best of all worlds as 2014 comes to a close.

“We’re taking advantage of it — paying down debt and doing some other things . . . because it isn’t always going to be like this,” said Lewis, owner of a 33-unit dry van fleet, Ed Lewis Trucking, in Louisville, Illinois.

Even before the latest drop in diesel, Lewis said falling prices were saving him $19,000 a month, money he said he’s using to pay down the cost of his new trucks.

“And there’s a lot of freight out there right now,” he said of the capacity limits that are keeping his rates steady.

Lewis said his company bought 12 new trucks, and the 2015 models are among the most fuel-efficient on the market, providing even more fuel-cost savings.

Lewis said he’s running one of the models on a route back and forth to San Diego, and found the truck gets 8.2 miles to the gallon, compared with the 6 miles his old trucks got.

“The fuel savings alone makes the payment [on the truck],” he said.

Chris Christopher, an economist with IHS Global Insight, said the low fuel prices could produce even greater benefits for the trucking industry in 2015.

“Overall, consumer demand’s going to be higher and, therefore, there will be more goods being transported through the supply chain” at a cheaper cost for fuel, he said.

EIA said last week that the average U.S. household is “expected to spend about $550 less on gasoline in 2015 compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years.”

IHS puts the figure even higher — at $700, Christopher said.

“More consumer demand for consumer goods; cheaper transportation costs and American families have basically more money. . . all this is a plus, plus . . . for trucking,” he said.