Diesel Dips 2.4¢ to $4.121
By Frederick Kiel, Staff Reporter
This story appears in the Sept. 8 print edition of Transport Topics.
The average price of retail diesel in the United States dipped 2.4 cents a gallon last week to $4.121, the seventh straight decline, even as Hurricane Gustav reached the Gulf Coast, the Department of Energy reported.
The storm apparently caused only minimal damage to the region and to oil production facilities in the Gulf, leaving analysts with differing opinions as to the effect it would have on pump prices.
“Hurricane Gustav’s threat to the oil rigs and refineries in the Gulf Coast was the main reason that diesel didn’t drop a lot more,” Phil Flynn, senior energy analyst at Alaron Research, told Transport Topics. “Now that the storm passed through without causing any major damage to the oil infrastructure, the downward pressure of crude oil price drops should keep diesel falling in bigger chunks in coming weeks.”
Crude oil slipped below $108 a barrel on the New York Mercantile Exchange on Sept. 3, Bloomberg News reported. That was down from about $115 a barrel on Aug. 29, and more than $35 a barrel below crude’s record of $145.29, set on July 3.
However, Tancred Lidderdale, senior economist at DOE’s Energy Information Administration, said he believed last week’s small decline was a signal the drop in diesel prices was nearly over.
“Retail diesel’s price decline slowed because its wholesale price has stabilized,” Lidderdale said. “We would expect that retail diesel’s decline has probably run its course, but it depends on what happens to the price of crude from here on out.”
The national average diesel price has now fallen 64.3 cents since reaching its high of $4.764 July 14. But last week’s decline was the smallest during the span. Diesel remains $1.228 a gallon more expensive than during the corresponding time last year. DOE also said the average retail gasoline average continued to decline, but fell just a half-cent to $3.68 a gallon.
Gasoline has dropped eight straight weeks since its record high of $4.114 on July 7. Despite its 43.4-cent drop over that period, gasoline was still 88.4 cents higher than it was early in September 2007.
That means the trucking industry paid about $921 million more for diesel last week than the corresponding week in 2007, at a burn rate of 750 million gallons. In addition, truckers paid $252 million more for gasoline last week than a year ago, at a weekly consumption rate of 285 million gallons.
Several trucking company executives said that despite the falling prices, they were still reeling from the surge earlier in the year.
“We’re choking on the fuel increases,” said Michael Leboki Jr., owner of Taylor Transport and J&J Transport in Vancouver, Wash. “Diesel goes up by three bucks a gallon, and it then comes down by 50 cents, and I’m supposed to say that gives my companies relief?”
Leboki, whose companies run about 50 trucks locally in construction and recycling, told TT he has had to “go to the bank time after time to increase lines of credit in order to pay for fuel until the surcharges came in, and that’s been drastically eating away at our cash flow for the past year.”
He said that dozens of independent truckers in the area have been going bankrupt. “It’s all been very disturbing and took all of the fun out of running your own company,” Leboki said.
Mike Ringle, operations manager of Brunton Motor Freight Inc., Pontiac, Ill., said even though his company has had some success collecting fuel surcharges, the business environment remains very difficult.
“We’re a lucky company, not a successful one, because we have one major customer who can pay our fuel surcharges on time, and a lot of trucking firms don’t have that,” said Ringle. “Nevertheless, our operating revenue has fallen significantly this year and our net has decreased considerably, but probably more from the downturn in business than higher fuel costs.”
Brunton Motor is a flatbed company with 20 tractors and 60 trailers that specializes in hauling manufactured steel.
