Diesel Declines Another 19.4¢ to $3.288

By Dan Leone, Staff Reporter

This story appears in the Nov. 3 print edition of Transport Topics.

The average price of U.S. retail diesel shed another 19.4 cents last week, dropping to $3.288 a gallon, while the gasoline average fell below year-ago levels for the first time in 2008, according to the Department of Energy.

Commercial trucking’s main fuel has fallen 14 of the past 15 weeks — a combined total of $1.476 a gallon since its peak of $4.764 a gallon July 14 — but is still 13.1 cents above year-ago levels, DOE’s Energy Information Administration said after its Oct. 27 survey of filling stations.

The agency also reported that the average price of a gallon of retail gasoline fell 25.8 cents to $2.656 a gallon. Gas is now 21.6 cents below the corresponding week of 2007, and is at its lowest since March 2007.

One analyst noted that the sputtering U.S. economy has hammered demand for crude oil and refined products, prompting price cuts and instigating a buildup of inventories.

“The bottom line is that we have more supply than we need,” said Phil Flynn of Alaron Trading Corp. in Chicago. “Demand just isn’t there.”

One positive development from falling prices was noted by analyst Donald Broughton of Avondale Partners, who said they forestalled a number of carrier shutdowns in the third quarter of 2008 (see story; click here for related Premium Content story).

DOE figures show that U.S. distillate stockpiles are below year-ago levels, though inventories are about 1.5 million barrels more than when the diesel average hit its peak in mid-July.

Total stocks were about 126.6 million barrels as of Oct. 24, or 8.6 million barrels below the corresponding week of 2007.

Demand for distillates through July, the most recent data available, declined by about 42.3 million barrels compared with the same period in 2007, DOE said. It fell from year-ago levels in every month, a trend likely to continue as freight demand wanes.

DOE measures demand as the amount of fuel supplied to the market and breaks out the figure on a monthly basis.

Two carriers reached last week by Transport Topics said they continue to press their drivers to help maintain the aggressive fuel conservation programs their companies put in place to cope with this summer’s run-up at the pump.

“When we have a driver leaving point A for point B, we look at his route and pick the fuel stops for them based on prices,” said Cub Sorenson, driver administration manager for truckload carrier A.N. Webber, Kankakee, Ill.

Sorenson estimates that “shopping ahead of the drivers,” with the aid of the mapping and routing software the carrier installed last year, can save as much as 60 cents a gallon on fuel purchases.

A.N. Webber runs about 200 trucks with an average length of haul of 1,500 miles. The carrier burns about 100,000 gallons of fuel a week.

The head of another truckload carrier said his company encourages drivers to compete for the distinction of having the lowest weekly fuel bill.

“We show [drivers] all the fuel purchases that the company had in the last week, and we rank them from the highest fuel price paid down to the lowest, so that the drivers can see if [they made] a smart buy or a not-so-smart buy,” said Greg Brown, chief executive officer of B.R. Williams in Oxford, Ala.

Unlike A.N. Webber, B.R. Williams’ drivers are not actually routed to specific fuel stops, Brown said.

B.R. Williams also buys much of its fuel in bulk, for about 28 cents below the national average. The carrier burns about 60,000 gallons of diesel a week in 160 tractors.

Meanwhile, despite the slumping economy, crude oil last week posted its largest one-day gain since late September, gaining $4.77 a barrel on Oct. 29 to close at $67.50 a barrel on the New York Mercantile Exchange.

Even after that jump, the price of crude oil was about 46.5% below July’s record of $145.18 a barrel, and about $22 a barrel below year-ago levels.

Also last week, oil giant ExxonMobil broke its own record for the largest quarterly profit by a U.S. company, reporting on Oct. 30 third-quarter earnings of $14.8 billion, or $2.86 a share, up 58% from a year ago.