Diesel Average Falls 4.7¢ to $3.786 in Third Straight Decline

The average price for a gallon of U.S. retail diesel declined for the third week in a row, dropping 4.7 cents to $3.786, the Department of Energy reported.

Diesel has decreased 8.2 cents over the past three weeks and now sits 33.8 cents below the two-year high of $4.124 set May 2, DOE’s Energy Information Administration said Sept. 26 after its weekly survey of fueling stations.

Despite the downturn, trucking’s main fuel is still 83.5 cents above its price one year ago, $2.951.

DOE also said the retail average for regular gasoline posted the biggest drop in four months, falling 9.2 cents to $3.509.

It was the third straight decline totaling 16.5 cents and largest one-week plunge since May 23. However, gas is still 81.5 cents above the year-ago mark of $2.694.

Fuel prices had been “artificially high” for normal supply and demand economics due to the effects of Hurricane Irene, Tropical Storm Lee and the flooding in Mississippi, said Phil Flynn, a senior energy analyst at PFG Best, Chicago.

Planning for future fuel prices is especially important at McTyre Trucking Co., an Orlando, Fla.-based specialized carrier that transports oversized and overweight loads.

Instead of relying on fuel surcharges, the company quotes jobs based on its own projections for fuel prices. That way, customers know exactly what their costs will be, said John McTyre, the company’s president.

“I don’t believe in fuel surcharges,” said McTyre, who compared them with the baggage fees charged by airlines. “If you need more revenue, by gosh, raise the rate.”

Sometimes the company’s fuel projections are short term. For other jobs, it forecasts fuel prices a few years into the future based on predictions about the global economy.

“I study the news all day, every day,” McTyre said.

But even the most informed projection can be derailed by world events.

It only takes “one idiot overseas firing a missile at something” to cause $5 a gallon fuel, McTyre said.

A few years ago, McTyre Trucking restricted its trucks’ speed to 65 mph, down from 70, McTyre said.

The company also set the engine computers on its 60 trucks to shut down automatically after idling for five minutes, he said.

The lower speed restriction and idling limit have combined to save the company about $300,000 annually, McTyre estimated.

The company has chosen not to invest in auxiliary power units for its trucks. “It is cheaper, in our opinion, to put drivers in a hotel than to purchase and use APUs,” McTyre said.

About 90% of the time, the company is able to pair up drivers in the same hotel room, reducing the cost of their stay, he said.

“The driver is better rested to perform the next day and is more alert,” McTyre added.

Expedited truckload carrier Arab Cartage & Express Co., of Arab, Ala., invested about $115,000 to install a 15,000-gallon bulk fuel tank at its terminal, said Don Elrod, the company’s vice president.

The stored fuel is saving the company 18 to 30 cents a gallon compared with retail, while also enabling it to keep better records on fuel mileage, Elrod said.

Arab has also installed APUs on 10 of its 40 tractors, but hasn’t seen savings from the units apart from reducing wear and tear on the truck engines, Elrod said.

When examining the company’s bottom line, Elrod said “the cost of fuel just sticks out like a sore thumb.”

But in the end, there’s a lot more to trucking than the price of fuel. You also need safe drivers, he said.

Elrod said he’d rather have his drivers enjoy a square meal and rest for a while at a nicer truck stop, even if it means they’ll pay 2 or 3 cents more for fuel than they would at a less desirable stop on the other side of the highway.

Meanwhile, on Sept. 23, crude oil closed below $80 per barrel for only the second time in the past 11 months. The price of crude closed at $79.85 that day on the New York Mercantile Exchange before moving back above the $80 mark the following business day.

Looking ahead, PFG’s Flynn predicted that diesel would continue its downward trend in the short term.

“I can foresee diesel declining another 10 to 15 cents over the next couple weeks,” he said.