Diesel Average Drops 1.6¢

This story appears in the April 14 print edition of Transport Topics.

The U.S. retail diesel average slipped 1.6 cents last week to $3.959 per gallon, extending its slide to four weeks, the Department of Energy said.

The national average had fallen a combined 6.2 cents during that downturn after hitting $4.021 on March 10, its high point for 2014.

Last week’s price also was down 1.8 cents from the corresponding week a year earlier, DOE reported after its April 7 survey of filling stations.

Retail gasoline, however, rose for the ninth consecutive week, increasing 1.7 cents to $3.596 a gallon. Gas had risen 30.4 cents during that span but remained 1.2 cents below its price a year ago.

Timothy Hess, an analyst at DOE’s Energy Information Administration, pointed to a gradual decline in global crude oil prices as the primary source of diesel’s slow decline.

“We are seeing a pretty smooth ride for diesel through the summer, with gently declining prices and a slight recovery in inventories from where we ended the winter,” he said.

In its short-term energy outlook, issued April 8, EIA projected that average diesel prices will fall over the course of the year, dropping to about $3.81 by July and $3.74 in December.

Carriers are working to lower their fuel expenses in a variety of ways, such as purchasing new equipment, limiting idling and stressing efficiency to their drivers.

J. Grady Randolph, a flatbed carrier headquartered in Gaffney, S.C., has been investing in newer, more efficient tractors as it works to reduce its trade cycle to 4.5 years, said Mike Harlan, the company’s director of safety, maintenance and human resources.

The 160-truck fleet hauls large, heavy freight such as pre-formed concrete structures for parking garages and oversize tires for mining equipment, so it faces an inherent disadvantage on aerodynamics.

“We are trying everything we can, but we are a flatbed operation [specializing in] oversize, heavy haul, so we can’t hide our freight or put wings on the trailers or anything,” Harlan said.

However, the fleet has reduced fuel expenses by installing auxiliary power units to eliminate idling and by purchasing diesel in bulk to dispense at two of its major terminals. The company requires its drivers to fill up at those locations when they’re within 100 miles, he said.

J. Grady Randolph is part of the Daseke Inc. group of trucking companies.

Franklin Express Inc., a regional carrier based in Franklin, Ky., relies on driver coaching as a way to lessen fuel expenses, said Roy Reasonover, chairman and part owner at the company.

“We have driver meetings, and we stress fuel economy to them,” Reasonover said. “We try to monitor and educate.”

Franklin Express’ fuel supplier provides billing by tractor, enabling the carrier to track which units and drivers are getting the best fuel mileage, Reasonover said.

Hess said the increasing availability of domestic crude supplies will help push down oil prices as formerly imported barrels ease demand elsewhere in the world instead.

Although West Texas Intermediate crude, the U.S. benchmark, has been inching up after a sharp drop in early March, globally traded Brent blend generally has been moving down.

Brent crude, traded in London, fell more than $6 a barrel after cresting at $111.20 on March 3, but edged back above $107 in the past week.

WTI settled at $103.40 on the New York Mercantile Exchange on April 10, up $3.66 from the beginning of April but still down from its recent peak of $104.92 on March 3.

At the same time, stockpiles of the distillates used to produce diesel and heating fuel have been recovering. The harsh winter caused heating-fuel demand to spike, putting upward pressure on diesel prices on the East Coast, where diesel prices remain elevated compared with other parts of the country.

Current prices in New England and the Central Atlantic, although declining, are 10.6 and 14.3 cents higher than year-ago levels, respectively, according to DOE.

“The inventories got depleted a little bit more there than they did elsewhere in the country, and as a result they’ve seen a little bit tighter market and a little bit higher prices,” Hess said.

With winter in the rearview mirror, U.S. distillate stocks have been slowly rising. Inventories stood at 113.2 million barrels April 4, about 240,000 more than a week earlier, EIA said.

Gas prices have risen steadily despite the decline in oil prices due in large part to refiners’ switch to summer blends, which cost a bit more to produce, Hess said. Consumer demand for the fuel also typically rises in the spring and summer, he added.