Diesel Average Increases 3.7¢; Crude Briefly Tops $100
By Michael G. Malloy, Staff Reporter
This story appears in the Jan. 7 print edition of Transport Topics.
The average price of diesel fuel rose 3.7 cents to $3.345 a gallon last week while the price of crude oil pushed past $100 a barrel for the first time, which analysts said would soon lead to higher fuel prices.
Regular gasoline also rose last week, the Energy Department said Dec. 31, jumping 7.3 cents to $3.053.
In the previous week, diesel slipped 0.1 cent while gasoline dipped 1.8 cents.
One analyst warned that things could be worse. “Diesel prices are high, but there is a bit of a disconnect between the high oil prices and over-the-road diesel prices,” said Brad Simons, vice president of Simons Petroleum and president of that company’s Pathway Network for over-the-road truckers.
Because distillate inventories have been relatively strong, diesel prices are about 20 cents a gallon lower than they otherwise would be with crude oil at $100 a barrel, Simons said Jan. 3.
“My concern is that as we see inventories fall to a lower range, the over-the-road price could rise to an even higher level,” he said. That increase could push diesel to more than $3.50 a gallon.
“There is some [pricing] lag between crude and the pump — it generally takes about two to three weeks to work its way through the system,” said Rick Mueller, an analyst with Energy Security Analysis in Waltham, Mass.
Analysts attributed soaring crude prices to factors ranging from attacks on oil companies in Nigeria to cold weather boosting heating-oil demand in the United States and said more increases were likely for trucking’s main fuel.
Meanwhile, the Bush administration said last week that, despite soaring oil prices, it would not tap the Strategic Petroleum Reserve, The Associated Press reported.
The diesel increase was the first following four declines since it set an all-time record high of $3.444 a gallon Nov. 26. The increase in gas prices follows six straight declines since Nov. 12, when it rose 9.8 cents to $3.111, a five-month high.
“We’re also heading into the peak heating season, when diesel tends to compete with heating oil, so refiners are shifting to heating oil and diesel output from gasoline, to the extent they can,” Mueller said Jan. 3.
Mueller added that distillate fuel demand — which includes diesel and heating oil — has been growing faster than gasoline, which was confirmed by Laurie Falter, a DOE analyst, who said last week that distillate demand was 4.7% higher last week than it was a year ago.
“Right now, the expectation is there is enough distillate supply out there, but if there is more cold weather, there could be more tightening,” leading to higher prices, Mueller said.
Falter said DOE’s monthly short-term energy outlook, scheduled to be released Jan. 8, would show that, though crude prices will be higher in 2008 than the $72 per-barrel average for last year, they are likely to decline from their current record levels later this year.
“We expect crude prices will soften, probably in the second half of the year, as there will be supply increases from OPEC and non-OPEC producers,” she said. “That should filter through to [lower] diesel prices.”
Meanwhile, DOE said in its weekly inventory report released Jan. 3 that while crude stockpiles fell by 4.1 million barrels the previous week, gasoline and distillate supplies both rose — by 2 million and 570,000 barrels, respectively.
The gasoline and distillate gains were more than analysts had expected, Bloomberg News reported, while the crude decline was a bigger drop than predicted.
Following that report, oil surged to a record $100.09 in intraday trading Jan. 3 on the New York Mercantile Exchange, then fell back to close at $99.18 a barrel, Bloomberg reported. Futures touched $100 for the first time on Jan. 2, setting a closing-price record of $99.62 that day.
President Bush will not tap the SPR for price reasons, unless there is a true supply emergency, a White House spokeswoman said. As of early November, the SPR held 694 million barrels of oil to be used in a supply emergency, AP said.
Truckers, meanwhile, continued to be vexed by the high prices.
“Short of building our own refineries or using wind- or nuclear-powered vehicles, there is not a lot we can do,” said John Simourian II, president of Lily Transportation, a dedicated contract carrier based in Needham, Mass.
“All our trucks are governed at 65 miles per hour, with a top cruise speed of 63 mph,” Simourian told TT. “We have ongoing driver training and give bonuses for drivers based on [fuel economy] goals.”
Lily — a company that runs about 500 trucks nationwide and ranks No. 25 on the Transport Topics 50 list of the largest U.S. and Canadian logistics companies — also gets discounts at truck-stop chains, based on the number of gallons it buys, Simourian said.
This story appears in the Jan. 7 print edition of Transport Topics.
The average price of diesel fuel rose 3.7 cents to $3.345 a gallon last week while the price of crude oil pushed past $100 a barrel for the first time, which analysts said would soon lead to higher fuel prices.
Regular gasoline also rose last week, the Energy Department said Dec. 31, jumping 7.3 cents to $3.053.
In the previous week, diesel slipped 0.1 cent while gasoline dipped 1.8 cents.
One analyst warned that things could be worse. “Diesel prices are high, but there is a bit of a disconnect between the high oil prices and over-the-road diesel prices,” said Brad Simons, vice president of Simons Petroleum and president of that company’s Pathway Network for over-the-road truckers.
Because distillate inventories have been relatively strong, diesel prices are about 20 cents a gallon lower than they otherwise would be with crude oil at $100 a barrel, Simons said Jan. 3.
“My concern is that as we see inventories fall to a lower range, the over-the-road price could rise to an even higher level,” he said. That increase could push diesel to more than $3.50 a gallon.
“There is some [pricing] lag between crude and the pump — it generally takes about two to three weeks to work its way through the system,” said Rick Mueller, an analyst with Energy Security Analysis in Waltham, Mass.
Analysts attributed soaring crude prices to factors ranging from attacks on oil companies in Nigeria to cold weather boosting heating-oil demand in the United States and said more increases were likely for trucking’s main fuel.
Meanwhile, the Bush administration said last week that, despite soaring oil prices, it would not tap the Strategic Petroleum Reserve, The Associated Press reported.
The diesel increase was the first following four declines since it set an all-time record high of $3.444 a gallon Nov. 26. The increase in gas prices follows six straight declines since Nov. 12, when it rose 9.8 cents to $3.111, a five-month high.
“We’re also heading into the peak heating season, when diesel tends to compete with heating oil, so refiners are shifting to heating oil and diesel output from gasoline, to the extent they can,” Mueller said Jan. 3.
Mueller added that distillate fuel demand — which includes diesel and heating oil — has been growing faster than gasoline, which was confirmed by Laurie Falter, a DOE analyst, who said last week that distillate demand was 4.7% higher last week than it was a year ago.
“Right now, the expectation is there is enough distillate supply out there, but if there is more cold weather, there could be more tightening,” leading to higher prices, Mueller said.
Falter said DOE’s monthly short-term energy outlook, scheduled to be released Jan. 8, would show that, though crude prices will be higher in 2008 than the $72 per-barrel average for last year, they are likely to decline from their current record levels later this year.
“We expect crude prices will soften, probably in the second half of the year, as there will be supply increases from OPEC and non-OPEC producers,” she said. “That should filter through to [lower] diesel prices.”
Meanwhile, DOE said in its weekly inventory report released Jan. 3 that while crude stockpiles fell by 4.1 million barrels the previous week, gasoline and distillate supplies both rose — by 2 million and 570,000 barrels, respectively.
The gasoline and distillate gains were more than analysts had expected, Bloomberg News reported, while the crude decline was a bigger drop than predicted.
Following that report, oil surged to a record $100.09 in intraday trading Jan. 3 on the New York Mercantile Exchange, then fell back to close at $99.18 a barrel, Bloomberg reported. Futures touched $100 for the first time on Jan. 2, setting a closing-price record of $99.62 that day.
President Bush will not tap the SPR for price reasons, unless there is a true supply emergency, a White House spokeswoman said. As of early November, the SPR held 694 million barrels of oil to be used in a supply emergency, AP said.
Truckers, meanwhile, continued to be vexed by the high prices.
“Short of building our own refineries or using wind- or nuclear-powered vehicles, there is not a lot we can do,” said John Simourian II, president of Lily Transportation, a dedicated contract carrier based in Needham, Mass.
“All our trucks are governed at 65 miles per hour, with a top cruise speed of 63 mph,” Simourian told TT. “We have ongoing driver training and give bonuses for drivers based on [fuel economy] goals.”
Lily — a company that runs about 500 trucks nationwide and ranks No. 25 on the Transport Topics 50 list of the largest U.S. and Canadian logistics companies — also gets discounts at truck-stop chains, based on the number of gallons it buys, Simourian said.
