Diesel Declines 0.9¢ to $2.87; Gasoline Average Also Drops

This story appears in the Jan. 25 print edition of Transport Topics.

The national diesel average declined 0.9 cent to $2.87 last week as pump prices moderated after a sharp spike the prior three weeks, the Department of Energy reported.

The decline was the first in four weeks and followed an increase of 15.3 cents for trucking’s main fuel since Dec. 21.

The gasoline average dipped 1.2 cents a gallon to $2.739 after rising 16.2 cents in the prior three weeks, DOE said after its Jan. 18 survey of fueling stations.

With the latest changes, diesel now stands 57.4 cents, or 25%, above this time last year, while gasoline is 89.2 cents, or more than 48%, higher.

The diesel average backed off from $2.879, the highest price in the past 14 months, as crude oil re-mained below $80 a barrel, settling late last week at $76.08 on the New York Mercantile Exchange.

However, fuel prices still are rising for Schulz Transportation Service Inc., Lincoln, Neb., a meat hauler that experienced a 20-cent-a-gallon increase so far this year, President Alan Schulz told Transport Topics.

“The short-term cash flow is hurt,” he said, because of the lag time between payment for fuel at truck stops and payment for freight by customers.

However, Schulz said his fleet, which operates 95 tractors, has had success in collecting fuel surcharges.

“Most of our customers are very fair about the fuel surcharge,” he said. “It has been a learning curve, but I think most of them get it now.”

Schulz said he’s also had success in cutting fuel costs by adding 28 aerodynamic tractors to the fleet, which increased fuel economy by at least 0.5 mile a gallon over “long and tall” models.

The fleet that specializes in shipments to the West Coast also cut its top allowable speed to 72 mph, which is required to make sure drivers can complete their runs efficiently, he explained.

A further reduction of 5 mph would force drivers to take a third break and complicate delivery schedules, Schulz said.

Schulz also is experimenting with skirts on trailers and more frequent filter changes to further boost mileage.

Nearly 400 miles west of Lincoln, Brent Holliday, chief executive officer of Nebraska Transport Co. in Scottsbluff, Neb., is taking a cautious approach to buying fuel.

“We are going with market price,” he said, though he acknowledged that he’s watching for any opportunity to cash in on lower prices, such as bulk purchases.

“I think we have bottomed out as far as the economy goes,” Holliday said. “We have to be more aware than ever of geopolitical situations. We don’t want to make any mistakes.”

He noted that Nebraska Transport, which runs 135 tractors and operates a 10-state less-than-truckload network, has had a mixture of experiences with fuel contracting.

Like Schulz, Holliday lowered the speed of his trucks, seeking to capitalize on savings.

He also took matters into his own hands.

“What I personally did was send an air gauge to my terminal managers and said I’ll be calling you in a few days to check on tire inflation,” he said. In the end, tire pressure on trailers at most of the terminals was “right where it needed to be,” Holliday said.

He also noted that some forecasts are calling for crude oil to remain between $65 and $85 a barrel.

Count Phil Flynn, senior market analyst at PFG Best Research, Cedar Falls, Iowa, as one of those who believe fuel prices will moderate this year and will be based more on supply and demand and less on speculation.

He noted that the recent drop — or “melting” as he called it — in crude resulted from warmer weather in January that eased the drawdown on inventories.

“We could see a situation where demand gets better and prices will be brought down because of a rebound in the U.S. dollar and the economy,” Flynn said. “People should be happy about that because last year, the price kept going up, but demand was bad.”

Crude supply has improved because members of the Organization of Petroleum Exporting Countries are not complying as much with the group’s production quotas, he added.

“Truckers have been through a lot,” Flynn said, citing record high fuel prices and the weak economy. “They have been through the wringer. It seemed like diesel

kept going up despite the abundant supply. I see a marked im-provement ahead, but it will be in baby steps.”