Diesel Dips 2.8¢ to $3.721 a Gallon

The U.S. retail diesel and gasoline averages declined for the fifth straight week, even as crude oil prices continued to rise, the Department of Energy reported.

Diesel dipped by 2.8 cents a gallon to $3.721, DOE said after its Oct. 10 survey of fueling stations. The combined five-week decline reached 14.7 cents. While diesel peaked for the year at $4.124 on May 2, a year ago it was $3.066, 65.5 cents lower.

DOE also said gasoline slipped 1.6 cents a gallon to $3.417. The five declines for gasoline total 25.7 cents. So far this year, gas topped out at $3.965 on May 9, but cost $2.819 a year ago.

U.S. trucking uses about 35.3 billion gallons of diesel a year, according to American Trucking Associations figures. Therefore, the 14.7-cent decline, if sustained, would save the industry $5.19 billion a year. However, fleet concerns about diesel seem to be permanently ingrained.

“Prices may appear to be down, but they’re really moving [up and down] in a sine curve. They’re still high by historical standards and we’re keeping all of our measures for saving in place,” said Connie Sims, director of fuel management for Tango Transport, Shreveport, La.

“Fuel is the pre-eminent issue for everyone. Fuel and tolls are always the top two issues in my market,” said Keith Walborn, a Camp Hill, Pa., agent for flatbed and intermodal carrier Evans Delivery. As an agent, Walborn neither owns trucks nor buys diesel, but he does have to make sure his 26 owner-operators remain financially sound so they can keep providing him with hauling capacity.

“It’s a constant concern of theirs. They have to fill up at least twice a week, and I want long-term relations with them.”

The decline in fuel prices corresponds with lighter usage, said a recent report from UCLA and business data services provider Ceridian Corp. Truckers’ fuel purchases dropped the most in the three months through September of any quarter in the past 10 years, excluding recessions, as deliveries slowed to retailers, factories and consumers.

The Ceridian-UCLA Pulse of Commerce Index, which measures the volume of driver purchases at fueling stations nationwide, dropped at an annualized rate of 4.3% during the third quarter.

Economic uncertainty should keep diesel prices from rising dramatically, said petroleum analyst Andrew Reed, a principal with Energy Security Analysis Inc., Wakefield, Mass. He said he anticipates diesel prices “will hold and be stable for now and then weaken into the first quarter.”

Reed said U.S. diesel prices would be even more likely to decline if it were not for the export of finished diesel from domestic refineries to Europe, which uses diesel for freight transportation and many passenger cars. The exports should prop up the price of fuel and keep it from sustained decline, he said.

The Energy Information Administration said in its Oct. 12 Short-Term Outlook that staff expects on-highway diesel fuel retail prices, which averaged $2.99 a gallon in 2010, will average $3.80 this year and $3.73 a gallon — roughly the current price — in 2012.

Crude oil futures on the New York Mercantile Exchange dropped to close at $75.67 a barrel on Oct. 4, the lowest price in more than 12 months. Since then the price has increased by more than $10, closing at $84.23 a barrel on Oct. 13.

Oil had been as high as $113.93 on April 29. On the London futures market Brent crude oil moved above $110 a barrel. The substantial gap is the result of a supply glut in Cushing, Okla. — the basis of the NYMEX price, compared with strong demand for North Sea oil — the basis of the London price (3-7, p. 38).

Tango Transport’s Sims said she will continue her activities, monitoring prices closely. She said she looks at bulk purchase prices, truck stop rates and the NYMEX heating oil contract on a daily basis.

Tango, which runs dry vans and flatbeds, has fuel-purchase discount programs with truck stop chains for when drivers are on the road. When nearing one of Tango’s three terminals in Arkansas and Louisiana, though, the company urges drivers to fill up there because Tango buys in 7,500-gallon wholesale batches that lead to better prices.

Furthermore, Sims said she times the purchases of those batches based on pricing trends — published daily at 6 p.m. — and the number of drivers expected at a given terminal.

“If prices are trending down, we’ll postpone our bulk purchases to take advantage,” Sims said.