Diesel Avg. Falls 2.5¢ to $3.832

This story appears in the Nov. 18 print edition of Transport Topics.

The average price of diesel fuel continued its gradual decline last week, dropping 2.5 cents to $3.832 a gallon, the lowest price in more than four months, the U.S. Department of Energy reported.

The agency said the price of gasoline fell even faster, dropping 7.1 cents to $3.194 a gallon. That was the lowest price since Feb. 21, 2011, when it was $3.189, DOE said after its Nov. 11 survey of fueling stations.

Diesel has not increased in price in 10 weeks, and over that period declined 14.9 cents, while gasoline dropped 41.4 cents.

The latest drops left diesel 14.8 cents below the same week of last year, while gasoline is down 25.5 cents over the same period. The current diesel price is the lowest since July 8, when it was $3.828.

A Nov. 13 Energy Department report discussed several reasons for the widening price differential between diesel and gas.

“Factors contributing to lower gasoline prices include lower seasonal demand, the switchover to winter-grade gasoline and continued higher refinery utilization rates to accommodate world diesel demand,” DOE said in its latest short-term energy outlook.

Stephen Schork, president of consulting firm Schork Group of Villanova, Pa., cited another factor.

“The pullback [in both fuel prices] in general is a function of the correction in crude,” he told Transport Topics, citing a drop of 15% in West Texas Intermediate crude prices, which stood at $110.53 per barrel Sept. 6. Late last week, the price had drifted down to settle at $93.76 per barrel on the New York Mercantile Exchange.

While Schork anticipates gasoline will start rising again as holiday travel picks up, he said diesel won’t change as fast because demand for trucking’s main fuel is more steady.

While prices have changed gradually on a weekly basis, the day-to-day picture is different, said Jason Higginbotham, assistant chief financial officer at Memphis, Tenn.-based Ozark Motor Lines.

“We have seen tremendous price volatility,” said Higginbotham, who directs all road and bulk-fuel purchases for Ozark. Prices are changing as much as 6 cents in a single day, affecting Ozark’s purchasing strategy.

The company copes by using fuel price-optimization technology to fuel its 715 tractors at truck stops or at Ozark’s four company terminals, wherever the lowest cost can be obtained, Higginbotham told TT.

Fuel-surcharge programs and discounts arranged with major truck-stop chains also are important, he added.

“The challenge with the volatility is that makes it hard to budget and estimate costs,” Higginbotham said. He said prices can change 25 cents to 30 cents per month, which he attributed to swings to financial markets driven by investors and federal fiscal policy, rather than supply and demand.

“Right now, we have seen a somewhat positive trend in the reduced cost of fuel,” Jim Germak, owner of  Marietta, Pa.-based Jagtrux, told TT. “We watch the market every day.”

Working with two fuel suppliers and watching for lower prices state-by-state also helps, he said, citing the advantage of filling up in states such as South Carolina, where diesel prices are lower than in neighboring states.

The real key to fuel efficiency, however, remains the skill of drivers.

“They are so influential,” Germak said, explaining that the difference between one driver and another over the same route with the same truck and the same freight can be as much as 1 mile per gallon.

Jagtrux uses a board to show its top 10 drivers’ fuel economy each week and rewards them with incentives such as free meals and other perks, he said.

The fleet of 40 tractors also benefits from 2014 equipment, Germak said, which has fuel economy at least a half-mile per gallon better than 2007 models.

In the absence of sharp diesel-price declines, fleets continue to embrace other fuel-saving methods.

Meanwhile, the DOE outlook projected that West Texas intermediate crude prices will average around $95 per barrel next year — right about where they were late last week.

Diesel on average next year is projected to cost $3.73 per gallon, about 5% cheaper than the $3.91 price for all of 2013.