Diesel Declines 3¢ to $3.919; Gasoline Lowest Since January

This story appears in the Oct. 7 print edition of Transport Topics.

The national average price for diesel fuel dipped 3 cents to $3.919 a gallon last week, the third straight decline, while gasoline dropped 7 cents to $3.425, its lowest level since January, the Department of Energy reported.

The diesel decline followed the previous week’s 2.5-cent downturn, marking the biggest weekly drops since late April. Last week’s price was 16 cents below the corresponding week a year ago, DOE said following its Sept. 30 weekly survey of filling stations.

The averages slid along with crude oil prices the same day — Oct. 1 — that the U.S. government began a partial shutdown over the budget impasse. Oil fell to a three-month low near $102, after peaking above $110 in early September when prices were at the highest level in more than two years.

Diesel, trucking’s main fuel, had not had fallen for at least three straight weeks since the end of May into early July, when it declined a modest 7.3 cents in total over six consecutive declines.

Although diesel has slipped 6.2 cents in the three straight declines, the price has held near or above $3.90 a gallon since July 22, DOE records showed.

A Pennsylvania-based trucking executive said last week that his company is using everything from auxiliary power units to bulk-buying discounts from truck stops to keep its fuel costs and consumption down.

“We try very hard to monitor our fuel mileage,” said William Buckley, safety director for Milton Transport in Milton, Pa. “If we have a truck that’s getting bad mileage, we bring it in and try to see why, and we keep the maintenance up on them.”

Milton’s 103 tractors run general freight primarily in the Northeast, and the carrier upgraded its company fleet (about 40% of the total) to 2012 and 2013 Volvo models, with automated manual transmissions, and it governs the trucks at 62 mph.

Milton now uses auxiliary power units for heat in the winter, which burn about a pint of diesel an hour, less than the gallon per hour burned while idling. Its trucks also use battery-powered air conditioning APUs in the summer, he said.

The truckload carrier began using APUs in 2006 and now has them in all of its tractors, Buckley said, adding that “you can’t really idle in cities anyway.” Milton delivers to major U.S. cities along the Atlantic Seaboard.

Meanwhile, DOE also reported last week that oil and gasoline supplies rose, while distillate inventories, which include diesel and heating oil, declined.

Crude inventories rose 5.5 million barrels for the week ended Sept. 27, well over analysts’ forecast of a 2.5 million-barrel build, Bloomberg News reported.

Gasoline supplies gained 3.5 million barrels, in contrast to a predicted 725,000-barrel decline, while distillates declined 1.7 million barrels, a bigger downturn than the 900,000-barrel drop forecast by Bloomberg analysts.

Gasoline’s price decline at the pump has been even more pronounced than diesel in the past month. The motor fuel has dropped 18.3 cents over four straight drops, and the downturn last week was the biggest in seven weeks, DOE records showed.

Gas prices are the lowest they have been at this time of year since 2010, according to published reports. Last week’s price was almost 38 cents below the corresponding week last year, according to DOE records.

Prices have declined this year in part because of lower seasonal demand, refineries switching to cheaper blends in the winter months as clean-air rules are relaxed, as well as having been relatively problem-free, and because no hurricanes hit the United States this year.

Oil, meanwhile, moved higher by about $2 to more than $104 a barrel Oct. 2 after TransCanada said it expects to finish construction on its Keystone pipeline expansion and begin commissioning the southern portion by the end of this month.

Crude oil prices fell 79 cents Oct. 3 to close at $103.31 a barrel on the New York Mercantile Exchange, on continued concern about the government shutdown, Bloomberg reported.

TransCanada is seeking approval from the U.S. government to build the controversial Keystone XL pipeline, a new, alternative route to move oil from Canada’s oil sands through the Great Plains states.

“The completion of the Keystone pipeline portion is bullish for [U.S. oil prices] but not for the globe,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, told Bloomberg.