Diesel Declines for First Time in Three Weeks

U.S. retail diesel prices slipped 0.5 cent to $3.887 a gallon last week, the Department of Energy reported, halting a string of three weekly increases.

The national diesel price average had jumped 17.1 cents over those three weeks before the dip, DOE’s Energy Information Administration said after its Nov. 7 survey of fueling stations. A year ago, the average was $3.116.

DOE also reported that the average price of a gallon of retail regular gasoline declined by 2.8 cents to $3.424. It was the third straight drop totaling 5.2 cents, but left the average still well above the year-earlier figure of $2.865.

Crude oil and fuel prices have, of late, been moving on basic supply and demand for the commodities themselves, rather than international politics and business news that often drives markets, said Brad Simons, president of the Pathway Network at Simons Petroleum.

“We’ve seen a very fast spike back up in crude oil since early October, but that was the low for the year,” said Simons, whose Oklahoma City company provides hedging and distribution services for truck stops and carriers. He noted that “inventories of crude and diesel have been drawn down, so they are below their five-year averages.”

In addition, he said that unlike the recent movements, price spikes earlier this year have been more tied into world events, such as unrest in Libya and the financial crisis, rather than supply and demand.

Crude oil future contracts on the New York Mercantile Exchange closed to $96.80 a barrel on Nov. 8, the highest closing price since July 29. The following day they closed at $95.74.

While far below the high close for the year of $113.93 on April 29, crude had fallen as low as $75.67 on Oct. 4. In the five weeks between the low point and Nov. 8, the price rose by 27.9%.

Two fleet executives said their carriers are fully braced for the return of $4-a-gallon diesel.

“We fully expect the price to go a little above $4 as the world economy continues to improve, and we think it will get there quickly,” said Danny Crawford, vice president of refrigerated carrier Wild West Express, Fairacres, N.M.

In studying fuel reports, Crawford observed that the average diesel average in 2008, which included a record $4.764 in July, was $3.80 a gallon. Through Nov. 7 of this year, the average has been $3.824.

Crawford said his tractor count has grown to 95 from 87 at the start of the year. In addition to the tractors, Wild West is investing in aerodynamic fairings. The company has run tests based on fueling expenditures and with in-cab communications units that hook to the engine control module.

“We saved about 5 to 8 gallons per truck for each fill-up. That’s a gain of 5% to 8% for us,” Crawford estimated.

Missouri flatbed hauler Steelman Transportation uses some of its 115 power units for transporting over-size and heavy-haul loads.

“It’s like hauling a huge parachute,” said Vice President Brett Sheets. In the worst cases, the company gets 3 miles per gallon on those loads, although 5 mpg is the average, he said.

“We have a staff meeting every Wednesday at lunch,” Sheets said, and fuel comes up in several places, such as driver orientation and fuel bonuses.

“And then it comes up daily in general conversation. We coach owner-operators and drivers,” Sheets said, adding that Steelman has posted a bounty of $1,000 to the first owner-operator who can demonstrate a sustained 9 mpg with an electronic onboard record. So far, the best level reported is 8 mpg, said Sheets.

Meanwhile, EIA said U.S. ultra-low-sulfur distillate stocks fell to 90.3 million barrels on Nov. 4, the lowest reading since April 2010. Distillate stocks had reached as high this year as 115.3 million barrels on Feb. 4.

In contrast, the rate of usage for distillate fuel oils, including diesel, is on the rise. As of Nov. 4, the United States was consuming 4.36 million barrels a day, said EIA.