Diesel Dips 3.3¢ to $3.094 as Crude Oil Price Plunges

This story appears in the May 24 print edition of Transport Topics.

The average price of retail diesel dipped 3.3 cents to $3.094 a gallon last week, the largest decline since Feb. 1, according to the Department of Energy.

The average price of gasoline dropped 4.1 cents a gallon to $2.864, and DOE attributed both reductions to the sharp fall in the price of crude oil since the start of May.

The May 17 survey of filling stations by DOE’s Energy Information Administration showed diesel’s second price decline in the past 13 weeks, while gasoline has fallen three times in that period.

Despite the decreases, diesel is still 86.3 cents a gallon more expensive than it was in the corresponding week of last year, while gasoline is 55.5 cents higher.

“Diesel certainly fell . . . because of rapidly falling crude, but maybe diesel’s time has come for a good drop in prices, which will be a boon for truckers,” Phil Flynn, senior energy analyst at PFG Best, Chicago, told Transport Topics.

Crude oil on the New York Mercantile Exchange closed at a relative low point of $71.19 a barrel on Feb. 5, and then climbed steadily to $86.84 on April 6. Crude remained in the $80 range until May 3, when it closed at $86.19. It then began falling precipitously, closing at $68.01 on May 20 — a fall of 21% over 17 days, during which foreign currency markets have been roiled by Greek debt and other financial problems in Europe.

“Since February, retail diesel has risen about 31 cents per gallon and crude about 36 cents a gallon,” John Felmy, chief economist at the American Petroleum Institute, told TT. He said that “since May 3, crude has fallen about 40 cents a gallon, while diesel dropped only about 4 cents.”

Felmy said that while diesel demand recently has been increasing in the United States for the first time since 2007, “diesel stocks also remain quite high.”

Truckers said the one-week price decline was not enough to bring solid benefits to their bottom lines.

“The price drop creates a little bit of relief, obviously, but not to the extent that everyone is jumping with joy,” James Mechlinski, vice president of operations at Cowan Systems, Baltimore, told TT.

“We can’t give rate increases to customers every time fuel spikes up, so that we’ve had to absorb much of those shifts upward in prices over the past few months,” Mechlinski said. “We usually can never recover what we lost from price upswings with any declines.”

“A drop of 4 cents in one week will not significantly impact our bottom line,” said Christopher Asberry, spokesman for Averitt Express, Cookeville, Tenn.

“What’s more important than slight fluctuations in price, however, is controlling our fuel economy,” Asberry added. He said Averitt has “taken many steps to help us achieve” greater fuel efficiency.

Averitt ranks No. 26 and Cowan No. 95 on Transport Topics’ list of the 100 largest for-hire carriers in the United States and Canada.

EIA said May 19 that the explosion last month on an offshore drilling rig near Louisiana has not yet had any effect on fuel supplies or prices. Oil has been leaking into the Gulf of Mexico since the explosion.

“Actual energy production and shipments have not been significantly impacted by the oil leak to date. Currently, only a fraction of 1% of offshore production has been shut in,” the agency said.

The agency cautioned that “some energy impacts could yet be seen,” but it added that potential hurricanes provided more of a threat.

“Unlike the present oil spill, recent Gulf of Mexico hurricanes have often had a significant short-term impact on the energy industry,” EIA said.

The offshore Gulf wells, the agency said, provide about 30% of the total crude oil and 13% of the total natural gas produced in the United States.