Diesel Average Falls Below $3 for First Time Since Sept. 2010
This story appears in the Jan. 26 print edition of Transport Topics.
For the first time since September 2010, the national retail average price for a gallon of diesel fuel is below $3 a gallon, which means trucking executives are both spending less money and pulling in less revenue as fuel surcharge receipts dwindle.
The Department of Energy said diesel prices fell for the 10th straight week, with the 12-cent decline on Jan. 19 bringing the average to $2.933 a gallon. The 10-week streak has seen diesel prices fall a combined 74.4 cents a gallon.
A year ago, trucking’s main fuel cost 94 cents more.
DOE’s Energy Information Administration also said the gasoline average price has fallen for 16 weeks, dropping to $2.066 a gallon after a 7.3-cent drop on Jan. 19.
The prices for refined oil products have followed the decline in crude prices since the middle of last year. The boom in domestic crude production, matched with stable demand,has driven down prices — with even President Obama taking notice.
“We are as free from the grip of foreign oil as we’ve been in almost 30 years,” Obama said in his State of the Union address Jan. 20.
The 2014 peak for crude was $107.26 a barrel June 20, but it has closed below $50 a barrel on the New York Mercantile Exchange since Jan. 6, including $46.31 on Jan. 22.
“It’s nice not to sign those big checks. We’re spending about 40% less” on fuel than several months ago, said Thomas Ehler, vice president of operations for Omega Fleet Service, an airfreight carrier based near Chicago’s O’Hare International Airport.
If Omega’s outgoing checks weigh less now, so too do its fuel surcharge receipts. While basic freight rates produced by the company’s 30 trucks are up some, fuel surcharges are down, and the combination of the two is also down a little, Ehler said. Plus, he noted, while EIA data said the Midwest diesel average is $2.889, pricing in the Chicago metropolitan area remains above $3 a gallon.
Western Transport Inc., in Idaho Falls, Idaho, has largely broken even, with fuel surcharge declines about matching basic rate increases, said Adam Hanson, operations manager for the refrigerated carrier of general commodities. The company has 62 tractors.
Hanson said he is worried about heavy shipments for the oil production industry declining over the next six months.
“The rapid drop in prices has been a little bit terrifying,” he said, stating that he knows residents of southeastern Idaho who work two- or three-week tours in the Bakken fields in North Dakota and then return home to families.
“I’m apprehensive because of heavy production layoffs,” Hanson said.
Owner-operators complain loudly when prices soar, but they’re quiet now, said Norita Taylor, a spokeswoman for the Owner-Operator Independent Drivers Association.
“We do know that the recent drop is certainly a relief for the time being, but the bigger picture is seeing what these lowering fuel prices will do to the economy,” Taylor said.
There is general concern about oil industry shipments, Taylor said, “but it’s too soon to tell, as of right now,” what the final outcome will be.
Taylor said independent drivers typically rely upon motor carriers to collect fuel surcharges for them and said they’re down significantly from a year ago.
In 2008, prices for diesel, gasoline and crude soared to records before blowing out as the recession gathered steam. Current prices are above the recession-era lows, but not tremendously so.
Diesel hit bottom at $2.017 a gallon in March 2009, and gasoline’s low was $1.613 in December 2008, according to EIA. That same month, crude oil fell to $33.87 a barrel.
The pounding from fuel-price surges over the past 10 years instilled a discipline in truckers, leaving them unlikely to return to wasteful spending habits. “We’re trying to be really conservative,” said Western’s Hanson. “We’re not letting up [on fuel conservation], not at all,” he said.
The company is delaying new tractor purchases, he said, until absolutely necessary.
“Our policies are the same,” said Ehler of Omega. The company is still instructing drivers not to idle their engines, and managers are checking road speeds.
In international oil production, Bloomberg News reported that Oman, the biggest Middle Eastern oil producer that’s not a member of OPEC, joined Venezuela and Iran in questioning the group’s decision to keep its output target unchanged, even with crude prices falling.
Bloomberg quoted an oil official from Oman, saying his country is having a “really difficult time” because of low oil prices.
