Diesel Creeps Up 1.6¢ to $2.668
This story appears in the Aug. 31 print edition of Transport Topics.
As reported by the Department of Energy, the diesel increase, the fifth consecutive rise, left the price virtually identical to the $2.664 fleets paid nine months earlier on Nov. 24. On the other hand, gasoline prices dipped 0.9 cent to $2.628 a gallon, the second straight weekly decline.
Over the past two months, diesel prices have risen by 5 cents, and gasoline has dropped 6.3 cents, movements of about 2%, as analysts including American Trucking Associations’ Bob Costello believe the U.S. economy bumps along the bottom.
Crude oil prices also have barely budged this summer, reaching $72.49 a barrel late last week, compared with $69.89 on June 30.
“Stability is good,” Tom Kret-singer Jr., president of American Central Transport, Liberty, Mo., told Transport Topics on Aug. 25. “I don’t think fuel is on the front burner these days — rates and utilization are.”
Prices that don’t change much make it easier to formulate pricing for bid packages, he added.
“Stability is also good for our customers,” Kretsinger said. “Last year [when prices were skyrocketing], they were getting pressure from their management because they were blowing through their fuel budgets. In that situation, everybody loses.”
At this time last year, diesel was at $4.145 a gallon, 55% higher than last week but lower than the $4.764 a gallon record set in July 2008.
Gasoline prices have fallen roughly 30% from $3.685 at this time in 2008.
“We are more focused on fuel, as well as other expenses, than we ever have been,” said Jim Richards, president of KLLM Transport Services, Jackson, Miss. “We anticipate the price of fuel to remain volatile, and in this environment, it is imperative to focus on every area of cost.”
Richards said some of the initiatives KLLM put in place are fueling more at terminals to take advantage of lower bulk fuel prices, paying incentives to reward drivers for reducing idling time, using more auxiliary power units and maximizing use of the company’s fuel optimization program.
“We are now achieving close to 100% compliance from our driver force at fueling where the optimization recommends, based on advantageous pricing,” Richards said.
Rapid fuel increases hurt, Kretsinger said, because “you buy fuel this week and the surcharge is based on last week’s DOE price, so you’re always a step behind.”
Another aspect of fuel surcharges can be unfavorable, Kretsinger said.
“The fuel surcharge is paid on computer-generated miles,” he explained. “You’re not covering the variance between the computer miles and the actual miles. You’re not covering empty miles, or idle time.”
Sam Farruggio, president of Farruggio’s Express, Bristol, Pa., had a different perspective on surcharges, because he runs a regional drayage fleet in eight northeastern metropolitan areas where an average trip can be 100 miles.
Farruggio told TT that fuel price swings “never reached the top of my radar screen,” because fuel surcharge programs have worked well for 90% of the drayage company’s customers.
What has been a concern, he said, is that Farruggio’s buys all its fuel in the Central Atlantic region, where prices typically are the second highest, after California, in DOE’s weekly survey. However, some customers demand that the surcharge be based on the national average.
Central Atlantic prices this year have been at least 12 cents a gallon higher than the national average virtually every week, with an even greater disparity in winter during home heating season.
“Some customers work off the national average,” he said. “I don’t have a choice where to buy my fuel. We can’t get them to understand where we operate.”
Analysts also see little change ahead for crude oil markets that ultimately drive fuel prices.
“The underlying fundamentals for the oil market are not improving — they are not getting worse in terms of the supply/demand imbalance,” said IHS Global Insight oil analyst Mary Novak. “The economic performance we are seeing right now is likely to be about the same. We are not having any new explosive issues in the oil market.”
“Our view is that oil prices will be stuck at relatively high levels because of the intramarket forces,” Novak said. “We are going to have $70-a-barrel oil as long as someone is willing to pay for it. They are going to keep pumping.”
