Diesel Dips for Week; Falls 7.8¢ in June

The average price of a gallon of retail diesel dipped 0.3 cent last week, to $4.645, making June only the second month so far in 2008 during which the average did not rise, the Department of Energy reported.

Meanwhile, the average price for gasoline rose 1.6 cents to a record $4.095, DOE said after its June 30 survey of fueling stations. The price of crude oil also set a new record last week.

The diesel average has now dropped in four of the past five weeks — it was unchanged on June 16 — but the average price of commercial trucking’s main fuel has fallen only 7.8 cents from its May 26 record of $4.723 a gallon, according to DOE’s data.

A DOE analyst attributed the trickle-down in diesel to rising summertime gasoline demand, which has made gasoline the more profitable fuel for refiners to produce.

“What’s showing up now is diesel’s softness [relative] to gasoline,” Laurie Falter, an analyst with DOE’s Energy Information Administration, told Transport Topics July 1.

In January, the only other month this year when the diesel average didn’t rise, the average fell 11.7 cents. Between the end of January and the end of May, diesel rose $1.464 a gallon.

Diesel is now $1.816-a-gallon more expensive than a year ago, meaning the trucking industry paid $1.33 billion more to pump the estimated 730 million gallons of diesel a week it consumes.

Similarly, gasoline is now $1.136 a gallon more expensive than in the corresponding week of 2007, translating into $329 million a week in additional fuel expenses for the trucking industry, which burns about 290 million gallons of gasoline each week.

One trucking executive said his company has accepted a higher driver turnover rate as the price of a strict fuel conservation policy.

“We have had a spike in turnover due to the fact that we are watching fuel so closely,” said Paul James, owner and president of truckload carrier Hiner Transport, Huntington, Ind.

Earlier this year, Hiner started monitoring the average fuel economy of its 200 trucks to identify “the bottom 20 [drivers] every week, in terms of fuel mileage,” said James.

The carrier works with those drivers to boost fuel economy by slowing down their rigs, requiring them to use cruise control more often and reducing idling time.

Conversely, drivers who achieve at least 6.5 miles per gallon receive a bonus.

The initiative has boosted Hiner’s average, fleetwide mileage rate to 6.85 mpg from about 6.6 mpg, James said.

“Times are changing, and drivers need to drive the truck properly in order for the company to survive,” said James.

The chief financial officer of another Midwestern truckload carrier agreed.

“The primary thing is trying to change driver behavior,” said Bill Wettstein, chief financial officer of Nussbaum Transportation Services in Normal, Ill.

As pump prices soared this year, Nussbaum began monitoring drivers and introduced training programs to encourage better driving habits, Wettstein said.

“Every month, we send out a letter to drivers that has their performance — mpg, idle time, out of route [miles] — and we compare those to our goals and our fleet average,” Wettstein said. “If [the results] are very poor, they’ll have a discussion with their supervisor.”

This has improved the average fuel economy of Nussbaum’s fleet of 140 trucks by about 17% in the second quarter over the first quarter.

Meanwhile, crude oil set several new records last week, closing at a high of $143.74 on July 2 on the New York Mercantile Exchange.

Oil prices in the second quarter of 2008 rose 38%, the single largest quarterly increase in nine years, Bloomberg News reported.

Traders began bidding up crude last week following news reports of growing tensions in the Middle East between Israel and Iran — which is the second-largest OPEC oil exporter after Saudi Arabia.

Additional concerns were sparked after a July 2 report from the International Energy Agency said spare OPEC oil capacity is likely to diminish by 2013, further tightening global markets.