Diesel Dips 1.7¢ to $2.835, AAA Says

This story appears in the Feb. 15 print edition of Transport Topics.

Diesel prices largely held steady last week, with the national average price per gallon at $2.835, falling just 1.7 cents from the previous week, according to AAA’s daily price report for Feb. 11.

The AAA average price one week earlier, on Feb. 4, was $2.852. The corresponding U.S. Department of Energy report on Feb. 1 showed that diesel had averaged $2.781 (click here for previous story).

DOE, which provides weekly fuel price data that are widely used in the trucking industry, did not publish its regular weekly report on Feb. 8 because federal government offices were closed for four consecutive days by record-breaking snowfalls in Washington, D.C.

For regular gasoline, AAA reported, the average price per gallon on Feb. 11 was $2.636, or 2.3 cents lower than $2.659 seven days earlier. DOE’s corresponding average for gasoline was $2.66.

“We are not seeing dramatic changes in fuel prices,” Tom Kretsinger Jr., president of American Central Transport Inc., Liberty, Mo., told Transport Topics on Feb. 11. “That is good. When you have a rapid increase, the fuel surcharge does not keep up with the increasing price we pay.”

Though relatively stable fuel prices benefit the industry, Kretsinger said the absence of a DOE fuel price last week caused a headache.

“We are trying to figure out the effects of that,” he said, because payments to owner-operators and some surcharges are based on that price.

“There will have to be some reconciliation of that in the following week,” Kretsinger said. “That will be a hassle for the accounting folks.”

Winter affects fleets in another way, he said, because a different blend of fuel is used that cuts fuel efficiency by about 0.5 mile per gallon.

Snowstorms also influenced markets last week.

“The weather has been supporting fuel prices this week,” Phil Flynn, an analyst at PFG Best Research, Chicago, told Transport Topics on Feb. 11, citing snowfall that closed government and businesses in some states. “Gas and fuel demand should have been weaker because the mid-Atlantic states have been shut down by the weather.”

Crude oil futures prices on the New York Mercantile Exchange rose earlier in the week because traders expected demand for heating oil would rise because of the bad weather, he said. Crude oil settled at $75.28 on Feb. 11, compared with $73.14 one week earlier.

Diesel prices per gallon on Feb. 11 of last year averaged $2.354, or 17% below the average on Thursday of last week, AAA said. The year-to-year gap in gasoline prices was even wider at $1.940, or 26% lower than the latest gasoline price.

Kretsinger said that other factors at play in the current fuel market affect fleets. Some of the fuel costs that carriers pay aren’t covered by surcharges, such as deadhead miles and costs for idling.

Carriers try to adjust base rates to account for fuel surcharges that are “light,” Kretsinger said, but adjusting is hard to do in current competitive markets.

Opinion was divided over the future course of fuel prices.

Flynn said world market forces would continue to push prices down.

Reduced confidence in the strength of the euro because of bailouts in Europe could weaken that currency and bring down fuel prices that are denominated in dollars, he said.

In addition, he said, steps by banks in China to slow economic growth in that nation could reduce overall worldwide demand.

The Energy Department’s latest short-term outlook, posted on its Web site Feb. 10 even though the federal government was officially closed in Washington, took a different view. DOE forecast that prices will rise later in the year to $82 a barrel after averaging around $76 this month and next.

Diesel prices will rise this year to an average of $2.95 per gallon, compared with $2.46 per gallon last year, DOE said, as world demand rises and the U.S. economy recovers.

“Despite the cold weather that gripped much of the nation in late December 2009 and early January 2010, total U.S. liquid fuels consumption in those two months still fell below the levels seen in the same months a year earlier,” the report said, citing weak demand.