Diesel Average Rises 1.1¢ While Crude Exceeds $100

This story appears in the July 15 print edition of Transport Topics.

The average pump price for a gallon of diesel edged up last week for the first time in seven weeks, increasing 1.1 cents to $3.828, the U.S. Department of Energy reported. At the same time, crude oil climbed above $100 a barrel for the first time in 14 months.

The retail gasoline average, on the other hand, dipped 0.4 cent to $3.492 in its fourth straight downturn, according to DOE’s July 8 survey of filling stations.

Following its gain last week, diesel was 14.5 cents higher than a year ago; the average had been at an 11-month low before the increase. Gasoline remained 8.1 cents higher than a year ago despite falling 16.3 cents over the past four weeks.

Tom Kloza, chief oil analyst at Oil Price Information Service, pointed to escalating crude oil prices as the source of diesel’s increase.

“I think it was all crude-related,” he said. “That’s the tide that’s lifting all boats now, whether it’s diesel fuel in the U.S. or gasoline, to a certain extent.”

Although gas prices saw a slight decline last week, the downturn was far smaller than the previous week’s 8.1-cent drop, which was led by a 15.2-cent plunge in the DOE’s Midwest region. Last week, however, Midwest prices moved in the opposite direction, rising 1.5 cents.

Crude oil, which has been on the rise since late June, finished at $106.52 on July 10, its highest closing price on the New York Mercantile Exchange since March 2012, but slipped to $104.91 the next day. Crude prices have climbed more than $10 since closing at $93.69 on June 21.

That was enough to end diesel’s six-week slide, Kloza said. “That’s why you saw that trend break. Instead of that slow attrition, [diesel] just creeped a little bit higher.”

Kloza said much of the jump in crude prices is tied to the violence in Egypt following the ouster of President Mohammed Morsi and the “very small chance” that the unrest could affect the Suez Canal.

“It’s just the fear that something could happen as long as the violence continues,” he said.

The derailment and explosion of a train transporting crude oil in Quebec on July 6 is not likely to affect the short-term economics of fuel products in the United States, Kloza predicted.

He said he expects the oil from Canada’s western provinces to continue to move to eastern Canada and the eastern U.S. via railroad, “but I think that rail is going to be under some regulatory scrutiny now.”

Trucking companies, such as Stagecoach Cartage & Distribution in El Paso, Texas, have taken a variety of actions to improve their efficiency and reduce their fuel expenses.

Dale Zeitler, the truckload carrier’s accounting manager, said his company has boosted its fleet’s fuel mileage by purchasing new tractors with automatic transmissions, installing trailer side skirts and tails to improve aerodynamics and paying bonuses to drivers based on miles per gallon.

These efforts have combined to increase Stagecoach’s fleetwide fuel mileage by 10% over the past two years, he said. “At prices near $4 a gallon, that’s a significant impact.”

However, the company is concerned that changes to the federal hours-of-service rules implemented on July 1 could hurt its fuel efficiency, Zeitler said.

It’s still too early to determine, he said, but more frequent breaks for drivers could lead to a reduction in the fleet’s overall miles per gallon, in addition to other operational challenges.

“When you’re cruising down the road at a preset speed, the engine is most efficient, but the more starts, stops and idle time, the more your fuel is impacted,” Zeitler said.

Truckload hauler American Central Transport Inc. has improved its fleet’s fuel mileage by concentrating on driver training and implementing performance-based pay, said Bob Kretsinger, the company’s senior vice president.

Since beginning its driver performance initiative a few years ago, the Liberty, Mo., carrier’s miles per gallon have risen to the mid-7 mpg range from a low-6 mpg, he said.

American Central Transport used to give special recognition to its drivers who attained 7 miles per gallon, but eventually nearly all of the drivers were reaching that benchmark so the company had to raise the bar to 8 mpg.

The performance pay has changed drivers’ behavior and mind-sets, Kretsinger said.

“They’re starting to think about it now — that this affects me, not just the company,” he said.