Diesel Dips 4.6¢ to $4.718
Decline in Crude Oil Pushes Fuel Prices Down
By Daniel P. Bearth, Staff Writer
This story appears in the July 28 print edition of Transport Topics.
The average price of retail diesel in the United States dipped 4.6 cents last week to $4.718 a gallon, the largest weekly drop in more than six months, the Department of Energy reported.
The decline in trucking’s main fuel followed a recent decline in the price of crude oil, as worldwide supplies increased and worries about disruptions in production in the Gulf of Mexico subsided when Hurricane Dolly moved onshore July 23 without damaging refineries.
Diesel prices declined in all regions last week, after hitting a record high of $4.764 a gallon the previous week, DOE said after its July 21 survey of fueling stations.
Still, the national average is up about 63%, or $1.829 cents a gallon, from the comparable time in 2007. The drop last week was the steepest since a 5-cent decline on Jan. 14. However, the fuel’s average price had risen 11.9 cents over the previous two weeks.
Also last week, DOE said the average regular gasoline price declined 4.9 cents to an average $4.064 a gallon. Gasoline peaked at $4.114 a gallon on July 7, but the most recent price was 37.4%, or $1.106 a gallon, higher than the same week a year ago.
U.S. trucking companies consume roughly 725 million gallons of diesel and 285 million gallons of gasoline each week.
Frederick Smith, chief executive officer of FedEx Corp., said he expects oil prices to fall in the second half of the year as the U.S. economy continues to grow very slowly.
“Barring some global event, I think oil prices will drift down for a while,” Smith said in an interview with Bloomberg television. “I don’t think we’re in a recession. We’re in a period of extremely low growth brought on by high fuel prices and the financial meltdown.”
Crude jumped more than 70% in the past year, closing at a record $145.29 a barrel on the New York Mercantile Exchange on July 3. The price has since dropped more than 13% and closed at $125.49 on July 24.
Truckload carrier Werner Enterprises said it spent $55 million more on fuel in the second quarter of 2008 than in the same period in 2007, despite the fact that the Omaha, Neb.-based company purchased nearly 2 million fewer gallons.
To help offset that expense, Werner trimmed the size of its fleet and implemented a number of fuel conservation measures, including the installation of auxiliary power units on about 30% of its trucks to minimize fuel used when trucks are stopped.
The company also said it lowered the number of nonbillable miles and increased the percentage of aerodynamic trucks in its fleet.
Similarly, truckload carrier Heartland Express said its average fuel cost rose 51.9% in the first six months of 2008 and as a result, after collecting surcharges from shippers, it posted a reduction in operating income of $9.3 million for the period.
Bob Brescia, executive vice president of Transplace Inc., a firm that provides logistics assistance to shippers and carriers, said he expects to see carriers make adjustments in fuel surcharges, such as adding flat rates for fuel used to power trailer refrigeration units, before seeking higher rates.
Despite the drop at the pump last week, diesel and gasoline prices remain well above year-ago levels, and new data indicate that higher energy costs are driving up consumer prices.
“Prices are accelerating,” said Bob Costello, chief economist for American Trucking Associations. “The consumer price index in June jumped 4.9% from a year earlier. Food and energy prices are certainly a problem, increasing 5.3% and 24.7%, respectively, from June 2007.”
Costello said he expects inflation pressure to continue as higher fuel costs are passed on to consumers.
The producer price index, which measures the change in prices received by domestic producers of goods and services, including services provided by motor carriers, rose 1.8% in June and is up 9.1%, compared with June 2007.
For truckload and less-than-truckload freight hauling, the PPI jumped an “incredible” 9.6% and 9.5%, respectively, from a year earlier, Costello said in a July 14 economic bulletin.
The jump in PPIs largely reflects the effect of fuel surcharges on freight rates, Costello said.
Retail diesel, which averaged $2.88 in 2007, is projected to average $4.35 a gallon for all of 2008 and $4.48 a gallon in 2009, DOE’s Energy Information Administration said in a short-term energy outlook published earlier this month.
Gasoline prices are projected to remain higher than $4 a gallon until the fourth quarter of 2009, EIA said.
This story appears in the July 28 print edition of Transport Topics.
The average price of retail diesel in the United States dipped 4.6 cents last week to $4.718 a gallon, the largest weekly drop in more than six months, the Department of Energy reported.
The decline in trucking’s main fuel followed a recent decline in the price of crude oil, as worldwide supplies increased and worries about disruptions in production in the Gulf of Mexico subsided when Hurricane Dolly moved onshore July 23 without damaging refineries.
Diesel prices declined in all regions last week, after hitting a record high of $4.764 a gallon the previous week, DOE said after its July 21 survey of fueling stations.
Still, the national average is up about 63%, or $1.829 cents a gallon, from the comparable time in 2007. The drop last week was the steepest since a 5-cent decline on Jan. 14. However, the fuel’s average price had risen 11.9 cents over the previous two weeks.
Also last week, DOE said the average regular gasoline price declined 4.9 cents to an average $4.064 a gallon. Gasoline peaked at $4.114 a gallon on July 7, but the most recent price was 37.4%, or $1.106 a gallon, higher than the same week a year ago.
U.S. trucking companies consume roughly 725 million gallons of diesel and 285 million gallons of gasoline each week.
Frederick Smith, chief executive officer of FedEx Corp., said he expects oil prices to fall in the second half of the year as the U.S. economy continues to grow very slowly.
“Barring some global event, I think oil prices will drift down for a while,” Smith said in an interview with Bloomberg television. “I don’t think we’re in a recession. We’re in a period of extremely low growth brought on by high fuel prices and the financial meltdown.”
Crude jumped more than 70% in the past year, closing at a record $145.29 a barrel on the New York Mercantile Exchange on July 3. The price has since dropped more than 13% and closed at $125.49 on July 24.
Truckload carrier Werner Enterprises said it spent $55 million more on fuel in the second quarter of 2008 than in the same period in 2007, despite the fact that the Omaha, Neb.-based company purchased nearly 2 million fewer gallons.
To help offset that expense, Werner trimmed the size of its fleet and implemented a number of fuel conservation measures, including the installation of auxiliary power units on about 30% of its trucks to minimize fuel used when trucks are stopped.
The company also said it lowered the number of nonbillable miles and increased the percentage of aerodynamic trucks in its fleet.
Similarly, truckload carrier Heartland Express said its average fuel cost rose 51.9% in the first six months of 2008 and as a result, after collecting surcharges from shippers, it posted a reduction in operating income of $9.3 million for the period.
Bob Brescia, executive vice president of Transplace Inc., a firm that provides logistics assistance to shippers and carriers, said he expects to see carriers make adjustments in fuel surcharges, such as adding flat rates for fuel used to power trailer refrigeration units, before seeking higher rates.
Despite the drop at the pump last week, diesel and gasoline prices remain well above year-ago levels, and new data indicate that higher energy costs are driving up consumer prices.
“Prices are accelerating,” said Bob Costello, chief economist for American Trucking Associations. “The consumer price index in June jumped 4.9% from a year earlier. Food and energy prices are certainly a problem, increasing 5.3% and 24.7%, respectively, from June 2007.”
Costello said he expects inflation pressure to continue as higher fuel costs are passed on to consumers.
The producer price index, which measures the change in prices received by domestic producers of goods and services, including services provided by motor carriers, rose 1.8% in June and is up 9.1%, compared with June 2007.
For truckload and less-than-truckload freight hauling, the PPI jumped an “incredible” 9.6% and 9.5%, respectively, from a year earlier, Costello said in a July 14 economic bulletin.
The jump in PPIs largely reflects the effect of fuel surcharges on freight rates, Costello said.
Retail diesel, which averaged $2.88 in 2007, is projected to average $4.35 a gallon for all of 2008 and $4.48 a gallon in 2009, DOE’s Energy Information Administration said in a short-term energy outlook published earlier this month.
Gasoline prices are projected to remain higher than $4 a gallon until the fourth quarter of 2009, EIA said.
