Diesel Dips 0.9¢ to $3.925; Price Declines for 4th Week

By Michael G. Malloy, Staff Reporter

This story appears in the June 2 print edition of Transport Topics.

Diesel’s national average price fell for a fourth week, although slightly, dipping 0.9 cent to $3.925 a gallon, the Department of Energy reported last week.

The downturn — the 10th in the past 13 weeks — left trucking’s main fuel 4.5 cents higher than the same week last year, DOE said following its weekly survey of filling stations, which was released May 27, after  the Memorial Day holiday weekend.

Gasoline rose by the same amount, gaining 0.9 cent to $3.674, its first increase in four weeks and leaving its price 2.9 cents higher than the corresponding week a year ago.

Gas, which has risen in 13 of the past 16 weeks, is 38 cents higher than it was in early February, DOE figures showed.

Diesel is about a dime below its level on March 10 when its national average was $4.021, the highest in almost a year. While the price has edged lower in the past month — it has declined 5 cents since late April — that’s better than rising prices, one trucking executive noted last week.

“Any nickel helps, and at least it’s going in the right direction,” said Sten Sohlberg, president of flatbed carrier Jones Bros. Trucking in Missoula, Montana, which runs 60 trucks in the United States and Canada.

Jones Bros. has instituted a plan in which its drivers share in fuel savings over a set level, giving them a financial incentive to cut fuel costs, Sohlberg said.

“We try to empower the driver to do it on their own by giving them a very generous fuel bonus,” he told Transport Topics.

“Any savings over 6 mpg we split with them 50-50,” he said, noting that “many of them do very, very well.”

“Many are getting 7½ miles a gallon and making $800 to $1,500 [in bonuses] per month,” Sohlberg said, adding that “our fleet is new; nothing older than 2012.”

Another carrier said it gives its drivers a different type of incentive, sharing savings when drivers can find lower-cost diesel, which it also splits 50-50 with drivers.

“We offer an incentive based on fuel pricing if they can beat the [DOE] national average” buying fuel on the road, said Tom Treadwell, IT manager for J.A. Trucking Inc., in West Newton, Pennsylvania.

“It works pretty well,” said Treadwell, whose company has a fleet of 28 trucks.

He added that the truckload carrier, which runs in the Northeast and Midwest, uses DOE’s Central Atlantic price for its Pennsylvania fuel purchases, because that state’s 51-cent diesel tax is among the highest in the country.

The Central Atlantic, a subregion of DOE’s East Coast region, generally has higher prices than the national average. Last week, it was $4.13 — the highest overall price among DOE’s regional prices.

Oil, meanwhile, closed above $104 a barrel for the third time in four trading days on May 27, dropping 11 cents to $104.11 a barrel on the New York Mercantile Exchange, Bloomberg News reported.

The three recent closing prices were the only times since mid-April that crude futures have closed above $104 on the Nymex.

One analyst told Transport Topics last week that global issues, including Ukraine’s natural-gas dispute with Russia, were having an effect on world oil prices, ultimately affecting domestic diesel prices.

“Normal, seasonal demand surge for diesel and gasoline has probably peaked, and the expectation is that prices have peaked, too,” said Phil Flynn, senior market analyst with Price Futures Group in Chicago.

“The problem is you’ve got these high oil prices, even though supplies are high. It’s a little hard when you can’t get oil below $104 a barrel,” Flynn said.

“A lot of it is the geopolitical situation,” Flynn said, adding that the two countries reaching an energy accord could cut oil prices by $5 to $10 a barrel.

The neighboring countries, which have politically strained relations, are facing a June deadline to reach an agreement under which Russia would continue to supply gas to Ukraine.

DOE also reported May 29 that distillate inventories, which include diesel, fell 200,000 barrels for the week ended May 23, while gasoline supplies fell 1.8 million barrels. Both were projected to increase, Bloomberg reported.

Crude oil output rose to 38,000 barrels a day, the highest level since 1986, DOE said in its weekly report. Crude inventories gained 1.7 million barrels for the week, and oil finished Nymex trading at $103.58 a barrel on May 29.