Diesel Average Tumbles 8.4¢ to $3.053
This story appears in the Jan. 19 print edition of Transport Topics.
The downward spiral of diesel’s national average pump price continued last week, falling closer to the $3 mark.
The price dropped 8.4 cents to $3.053 a gallon, the Department of Energy reported.
Trucking’s main fuel — which dropped 83.3 cents below its year-ago price — is at its lowest level since it was $3 in October, 2010, according to DOE records. The price has fallen 57.5 cents since Thanksgiving.
Last week’s tumble, the biggest in three weeks, followed plunging crude-oil prices, which held below $50 a barrel on the New York Mercantile Exchange for the first time in almost six years.
Gasoline also declined, falling 7.5 cents to $2.139, the lowest pump price since May 2009, DOE said Jan. 12 after its weekly survey of filling stations. The motorist group AAA reported last week that gas was selling for less than $2 a gallon in 18 states.
“The main story continues to be low oil prices,” said Sean Hill, an analyst in DOE’s Energy Information Administration.
“Near-term, the prices look really good for truckers, and anyone else driving anything,” he told Transport Topics. “There’s very little reason to think prices are going up anytime in the near future.”
EIA also released its monthly short-term energy outlook last week. It projected diesel will average $2.85 a gallon this year — down 22 cents from last month’s forecast. Diesel averaged $3.83 last year.
Oil will average $54.58 a barrel this year, down 13% from last month’s projected $62.75. U.S. crude prices averaged $93.26 last year.
“Over the last three or four [outlooks], we’ve kind of been playing catch-up” with falling prices, Hill said.
The report also projected gasoline will average $2.16 in the first quarter, a price that is forecast to save the average U.S. household $750 in fuel costs this year.
Crude futures finished Jan. 13 trading at $45.89 a barrel on the New York Mercantile Exchange, the lowest closing price since April 20, 2009.
They finished Jan. 15, before press time, trading at $46.25 a barrel on the Nymex.
Oil bottomed out at $33.87 in December 2008 during the recession, the lowest price since February 2004.
One fleet executive said last week that, while low prices were helping, his company was not hedging its fuel purchases at the current low price levels.
“Obviously, the drop in prices has been very beneficial to us, [but] it has not changed our buying patterns,” said Mark Gressett, fuel director for fleet operations at Indian River Transport in Winter Haven, Florida.
“We are considering” hedging at current low levels, he told TT, but are “looking for that floor [of low prices] that it doesn’t seem like we’ve found yet, but I believe we are close,” Gressett said.
“I think you’ll start seeing some resistance to any further drops once you get [oil prices of] around $40 a barrel,” he added.
Indian River, a bulk food-grade carrier that runs 600 trucks nationwide and in Canada, largely buys its fuel on-road and tells its drivers where to buy fuel with fuel-optimization software.
Settings on its trucks’ electronic control modules, which regulate engine performance, allow speed governors to vary in the 65 to 70 mph range, Gressett said.
If drivers “attain certain idle percentages and mpg combined, the ECM recognizes that and adjusts the governed speed,” he said. “If they exceed the idle or mpg parameters, then the speed is governed back down, accordingly.”
Meanwhile, EIA reported last week that oil supplies jumped 5.4 million barrels for the week ended Jan. 9, more than triple analysts’ estimates.
Distillate supplies, which include diesel, rose by almost
3 million barrels, EIA said in its Jan. 14 inventory report — about 1 million barrels higher than forecast — while gasoline stocks rose by 3.2 million barrels.
“It seems like every week when we have another inventory build, prices fall even more,” EIA’s Hill said.
Despite the current trend, EIA projected that oil, diesel and gas prices would rise gradually toward the end of this year and that diesel would average $3.25 next year, its first projection for 2016.
“Our expectation is that oil prices will stay low through the first half of this year,” Hill said, adding that EIA does not expect any significant changes in U.S. crude production or from OPEC countries.
Prices will push past $3 next winter due to seasonal factors, but EIA does not expect diesel prices to rise this winter as they normally do when the fuel competes with heating oil for distillate stocks.
“It certainly doesn’t look that way,” Hill said. “Any effects are outweighed by lower oil prices. We’re expecting this winter to be more reasonable, within the
10-year [weather] average,” versus the extremely cold weather of last January and February, which helped push diesel 35 cents higher.
