Diesel Climbs 8.7¢ to $3.943; Fuel Price Highest Since November

Retail diesel prices hit their highest levels in three months last week, jumping 8.7 cents to $3.943 a gallon, the Department of Energy reported.

Last week’s spike was the largest since Nov. 14, pushing commercial trucking’s main fuel to its most expensive point since Nov. 28, when it was $3.964 a gallon.

Diesel has increased five of the past six weeks, gaining a total of 15.4 cents, DOE said after its Feb. 13 survey of fueling stations. The last time diesel rose above $4 was Nov. 21.

American Trucking Associations estimates that trucking consumed about 37.2 billion gallons of fuel during 2011.

At a consumption rate of approximately 715 million a gallons a week, the 8.7-cent increase translates into an additional $62.2 million in added fuel expenses for the industry than the previous week.

DOE also reported that retail gasoline prices posted their seventh increase in eight weeks, rising 4.1 cents to $3.523 a gallon. Gasoline is at its highest point since Sept. 19, when it was $3.601.

Since hitting a 10-month low of $3.229 on Dec. 19, gasoline has risen 29.4 cents.

Last week’s increases left diesel 40.9 cents higher than a year earlier, an 11.6% year-over-year increase, and gasoline 38.3 cents above the same week in 2011.

“Our exports of diesel went up pretty dramatically [during the week of Feb. 5], and I think that’s kept upward pressure on the market here in the short term,” Phil Flynn, senior market analyst with PFGBest, Chicago, said last week.

Figures from DOE’s Energy Information Administration show exports increased 12.9% than a week earlier.

Flynn also said extremely cold weather in Europe has driven up demand for heating oil, which like diesel is produced from distillate stocks.

“At the same time, U.S. refinery runs have fallen pretty dramatically,” he said. “I think part of it is because the demand has been so poor for heating oil because of the mild winter in the U.S.,” he added.

Distillate fuel production fell 2.14% the week of Feb. 5 from the week prior, according to EIA.

An executive with Williams Trucking, Dothan, Ala., said the company has replaced its entire 30-truck fleet with model year 2012 and 2013 trucks, in part to save money on fuel.

“With these newer engines, we’re getting a mile, mile-and-a-half a gallon more,” said Don Williams, the carrier’s office manager.

Although the newer trucks have a higher price tag, Williams said it will pay off through increased fuel efficiency.

Still, that doesn’t change the immediate effect of the 8.7-cent spike in diesel prices.

“It means less money, less profitability. It really cuts in,” he said.

Most of Williams Trucking’s customers give the carrier a fuel surcharge, “but for the ones that don’t, it cuts into our bottom line” when prices jump up, Williams said. The carrier rarely gets fuel surcharges when working with a freight broker.

Yandell Truckaway Inc., Oakland, Calif., found that shippers often understand when the carrier needs to increase fuel surcharges.

“The one thing that we do have some understanding on from our shippers is the fuel,” said Alicia Yandell, director of operations. “They can go to the pump, as well, for their own personal vehicle and see the prices.”

However, Yandell sends weekly notices to customers about fuel surcharges that are based on the national DOE average, even though California’s price almost always is higher.

The reasoning for this decision is simply that the carrier’s out-of-state customers understand the national average better, Yandell said.

California’s diesel average was $4.209 a gallon last week, 6.7% higher than the national price, according to DOE.

Carriers operating in California must use fuel that conforms to the state’s low-carbon standard, which generally keeps this price higher than neighboring stations.

“It’s hard to compete with someone who can fuel up outside the state,” Yandell said.

Meanwhile, crude oil on the New York Mercantile Exchange rose above $100 a barrel on Feb. 13 for the first time in almost a month, Bloomberg News reported. The price stayed above $100 throughout the week, closing at $102.31 on Feb. 16.

Flynn, the analyst with PFGBest, said ongoing tensions in the Strait of Hormuz have kept crude oil prices high. Iran has threatened since early January to block the area, through which about a third of the world’s oil travels.