Transport Topics Staff This story appears in the Oct. 1 print edition of Transport Topics.
Retail diesel fuel prices declined 4.9 cents to $4.086 a gallon last week, the first price drop in 12 weeks, as U.S. demand weakened, according to the Department of Energy.
The week’s decline ended a 48.7-cent run-up that began July 2, DOE said after its Sept. 24 survey of fueling stations. The current pump price is 30 cents higher than it was a year ago.
DOE also reported that retail gasoline prices declined 5.2 cents to $3.826, also the first drop in 12 weeks. Gasoline, which had increased 52.2 cents since July 2, is now 31.7 cents higher than the corresponding week of 2011.
“Spot fuel prices are down dramatically,” said Phil Flynn, senior market analyst for Price Futures Group Inc. in Chicago. “It’s not quite heating season and gasoline demand is winding down. But we’re starting to see refineries come back online after [Hurricane Isaac] at a time when demand is weak.”
DOE said U.S. distillate stocks, which include diesel and heating oil, fell by 482,000 barrels to 127.75 million barrels in the most recent week. That compares with analysts’ average forecast for an increase of 800,000 barrels, Reuters reported.
U.S. gasoline inventories fell by 481,000 barrels to 195.83 million barrels, DOE said.
“Demand for gasoline continues to be poor, and the distillate category has posted a second week of stunning demand decline,” John Kilduff, of hedge fund Again Capital, told Reuters. “If that trend continues, more declines are in store for energy prices.”
The drawdown in distillate stockpiles was likely due to consumers filling up tanks ahead of the heating season, analysts said.
Sean Hill, an analyst with DOE’s Energy Information Administration, said that “crude prices have come down a bit over the last couple of weeks . . . which certainly contributes to the drop in product prices.”
Crude oil dropped below $90 a barrel for the first time in nearly eight weeks, closing at $89.98 Sept. 26 on the New York Mercantile Exchange. That was the lowest level since Aug. 2, when it closed at $87.13.
Rod Moseley, chief financial officer at truckload carrier Bulldog Hiway Express, North Charleston, S.C., said he welcomed the price declines, but he is prepared for further price fluctuations, especially because “these are not normal times to speak of, economically.”
“With surcharges, I don’t have to plan ahead to see if we’re going to have the revenue to pay for any increase,” he said. “The main thing is being able to work with your customers and accounts and let them know that, as fuel changes, the rates have to change with it.”
Bill Campeau, chief financial officer of truckload carrier D.M. Bowman Inc., Williamsport, Md., also said his company relies on surcharges.
However, he also said the company buys some fuel in bulk, which provides savings compared with retail prices.
Campeau also noted retail prices in the mid-Atlantic are often higher than other parts of the country, so if drivers “have to fill up here, we can direct them to the cheapest fuel without taking them off-route.” The fleet is able to do that, he said, because it has discount agreements with several companies that supply fuel and major truck-stop operators.
While cheaper fuel saves money, Campeau said, the real effort is put into increasing miles per gallon.
He said newer trucks have boosted fuel economy to 6.6 miles per gallon, compared with 5.2 mpg to 5.5 mpg on older equipment.
