Diesel Dips Another 5.1¢ to 16-Month Low of $3.678 Per Gallon

Retail diesel prices tumbled another 5.1 cents to $3.678 last week, the lowest level in 16 months, the U.S. Department of Energy reported.

Commercial trucking’s main fuel has fallen 11 straight weeks, totaling 47 cents. The current price is the lowest since Feb. 21, 2011, when it was $3.573, DOE said after its June 25 survey of fueling stations. At $3.678, diesel is 21 cents cheaper than a year earlier.

An analyst predicted the United States could be entering a period where fuel prices return to levels not seen since 2010, when the diesel average hovered around $3 for many months.

“I am predicting that the highest price for diesel and gasoline you pay this summer may be the highest price you’ll pay for a long time to come,” said Phil Flynn, an analyst with Price Futures Group in Chicago.

Flynn said a sluggish economy and a growing inventory of refined products in the United States because of cheaper crude oil will combine to keep diesel and gasoline prices low, perhaps for months.

DOE also reported that the price of gasoline dived 9.6 cents a gallon to $3.437, the 12th consecutive week it has dropped, DOE said. Gasoline has plummeted 50.4 cents since April 2, when it was $3.941. A year earlier, gasoline was 13.7 cents higher at $3.574.

Since May 1, the price of crude has declined from $106.16 a barrel to its June 28 close of $77.69 on the New York Mercantile Exchange, the lowest closing price since early October.

One trucking executive said falling prices do help his bottom line, but not enough to completely recover money spent when diesel spikes.

“It does benefit us more in local runs because that is where we have been missing out the most,” said Jim Burg, president of James Burg Trucking Co., Warren, Mich. “A lot of our customers are more set up for longer hauls” and the fuel surcharges are more geared for those movements.

He said not only do shorter hauls use more fuel because trucks are traveling at lower speeds than on highways, but they also usually have a higher deadhead percentage, which is not factored into surcharges.

“That is not in the fuel surcharge model, and that puts us upside down,” Burg said of deadhead miles.

Besides saving at retail pumps, falling oil and fuel prices allow McKinley Transport, Carson City, Mich., to continue saving an additional 5 cents to 10 cents a gallon on its bulk purchases, said Carl Brune, vice president at the tank truck operator.

McKinley, which has 57 tractors, maintains a 12,000-gallon tank in Carson City and a 10,000-gallon tank in Muskegon, Mich., Brune said.

“We also have a company that comes in to fuel our trucks,” which also saves, compared with retail prices, he added.

Roger Shortt, vice president of operations at Gaines Motor Lines Inc., Hickory, N.C., said he believed diesel is likely to decline in coming months, but only because the economy is keeping a lid on prices. Gaines added that the declines will benefit shippers, as fuel surcharges drop to match declines in diesel.

Meanwhile, DOE’s Energy Information Administration reported on June 22 that domestic stocks of distillate fuels were 4.51 million barrels, down 20,000 barrels from the previous week. However, inventory levels have increased six out of eight weeks since 4.13 million barrels were reported on April 27, EIA said.

“The expectations that the world would need more oil have been revised downward,” Flynn said. With a potential economic slowdown in China and turmoil in Europe, “We’ve gone from worrying about not having enough oil to almost having too much,” he said.