Diesel Declines 3.6¢ to $3.991, Seventh Drop in Eight Weeks

This story appears in the Dec. 17 print edition of Transport Topics.

U.S. retail diesel prices declined for the seventh time in the past eight weeks, down 3.6 cents to $3.991 a gallon, the U.S. Department of Energy reported.

Diesel has now fallen nearly 16 cents below the more than four-year high of $4.15 recorded on Oct. 15. But the fuel has topped $4 a gallon for a record 26 weeks this year. A year ago, trucking’s main fuel sold for $3.894.

The retail gasoline price dropped 4.5 cents to $3.349 a gallon, its 10th decline in the past 12 weeks, DOE said after its Dec. 10 survey of fueling stations. Gasoline has now fallen 52.9 cents a gallon since Sept. 17; it sold for $3.286 a year ago.

The recent diesel decline can be mostly attributed to lower crude oil prices, said Timothy Hess, a petroleum analyst with DOE’s Energy Information Administration.

“It’s been a crude oil story,” Hess said. “Crude prices have fallen a little bit, especially over the last week or so, which got [diesel] down below the $4 mark. That’s been the major factor behind the decrease.”

Crude closed on the New York Mercantile Exchange at $85.89 a barrel on Dec. 13, a slight increase after reaching the month’s high of $89.09 on Dec. 3.

The demand for diesel has also declined in recent months, Hess said.

For example, in September, the most recent data available, year-over-year diesel demand was down roughly 255,000 barrels a day, which equals roughly 6% of total daily demand, he said.

Hess said the decline in demand is puzzling since truck miles as a whole are up a little.

“It’s been a little bit of a mystery to us as to why demand is sagging a bit,” he said. “We’re going to keep looking into that one.”

He said truck efficiency gains are a possible explanation.

“That’s probably some of the story,” Hess said, “but it’s certainly not the whole story.”

Daniel Bearden, vice president of Marrlin Transit Inc., Van Buren, Ark., said his company uses in-cab heaters in the winter to keep drivers warm without running the engines.

“It burns off of diesel fuel, and it doesn’t require the truck to be turned on,” Bearden said, adding that idling burns far more fuel than in-cab heaters.

Bearden said Marrlin also governs its 50 power units at 59 miles per hour, closely monitors tire pressure and seeks lighter freight to improve its fuel economy.

Brady Poggendorf, operations manager for B J Trucking Inc., Phoenix, said his company’s fuel strategy is based on never allowing drivers to fill at stations on the road.

“We buy bulk straight from the rack,” Poggendorf said. “It comes to the yard, and our trucks only fuel here in the yard.”

Filling the trucks in the company yard saves the general freight hauler as much as 28 cents a gallon when compared with the cost of local diesel, Poggendorf said.

The company limits its runs to only two lanes — round trips from Phoenix to Los Angeles and Phoenix to Las Vegas.

“We can’t afford to go any further than that, because then we would have to buy fuel on the road,” Poggendorf said.

“We’ve run a couple different engine additives and run a couple of tests but didn’t see any significant increases to the point that it was justifiable in paying for itself,” Poggendorf added.

B J Trucking buys about 5,000 gallons at a time to fuel its five power units, which lasts for roughly two weeks.

Looking ahead, EIA said last week in its latest short-term energy outlook that diesel prices will average $3.89 a gallon during the first quarter of 2013.