Diesel Dips 1.3¢ to $2.756 in Fifth Consecutive Decline

This story appears in the Feb. 22 print edition of Transport Topics.

Diesel prices slipped for the fifth week in a row, dropping 1.3 cents to a national average of $2.756 a gallon, the U.S. Department of Energy said in its weekly fuel report.

The new report came out only days after DOE released its Feb. 12 report — which was delayed by federal government closings in Washington because of snow — which showed that the diesel average had declined 1.2 cents a gallon from the Feb. 1 average of $2.78.

Meanwhile, the average price of gasoline last week was down 4.4 cents, to $2.608, from $2.652 the previous week and $2.661 Feb. 1, the DOE said. Gasoline also has declined for five straight weeks.

Diesel prices have declined steadily since peaking Jan. 11 at $2.879 a gallon, the highest level since November 2008.

While lower diesel prices are “always” good news for truckers, Mike Hineman, systems information manager and fuel buyer for Skinner Transport in Reedsburg, Wis., said they will not last long where he does business.

“It’ll go up in the latter part of April, May, the first part of June for sure,” Hineman said. “That’s planting time, the farmers are back in the field and they use the same fuel we do.”

Doug Brown, chief financial officer for Cargo Transporters Inc., a Claremont, N.C., carrier, agreed.

“I will not be surprised to see it start back up in the spring of the year, and reach some fairly high levels in the summer,” Brown said.

Oil analysts said that diesel’s price declines probably have bottomed out.

Given DOE’s forecast that crude oil would rise to $82 a barrel in midsummer from the current level of around $77, Tancred Lidderdale, senior economist with DOE’s Energy Information Administration, said, “I wouldn’t necessarily expect any continued weakening of diesel fuel prices.”

Crude oil rose to $79.06 a barrel at the close of trading Feb. 18 on the New York Mercantile Exchange, oil’s highest price since Jan. 14.

While it’s unlikely trucking will suffer a repeat of the record-breaking diesel price of $4.764 reached in mid-2008, Tom Kloza, chief oil analyst at Oil Price Information Service, said, “I do think that we’re carving out a bottom here.”

The coming “bounce” in fuel prices, however, will be higher for gasoline than for diesel, Kloza said, because people will begin traveling in spring and because inventories of distillate used to make diesel and heating oil are high.

DOE reported last month, for example, that U.S. stocks of ultra-low-sulfur diesel, trucking’s main fuel, reached 100 million barrels.

In all of 2008, even as trucking was falling into recession, the stocks never reached 80 million barrels.

The five-week price decline in diesel and gasoline is linked to crude oil prices that fluctuated in January over concerns about the economy, the value of the dollar and China tightening its money supply, Lidderdale said.

Higher fuel prices and the recession have led trucking firms to reshape fuel habits, said Brown of Cargo Transporters.

“I can tell you our [miles per gallon average] has improved from 6.1 to 6.4,” Brown said.

He attributed the drop to two steps the firm took in 2008: It governed engines from a top speed of 65 mph to 63 mph and reduced idling time by installing heaters or auxiliary power units in its 390 trucks.

The carrier also uses a fuel optimizer to buy the least-expensive fuel. The optimizer tells the firm which drivers are not using the device so they can be “counseled” about the lapse, Brown said.

Hineman said that the same changes have been under way at Skinner Transport.

“I’m sure we’re getting at least a half a gallon to the mile better on average . . . over five years ago,” Hineman said. “We were getting, say, about 5.8 then. Now, we’re getting about 6.3.”

NOTE: Because DOE data were not available, Transport Topics on Feb. 15 reported AAA’s diesel price average of $2.835 per gallon.