Diesel Drops 2.3¢ to $3.778 as Distillate Supplies Surge

This story appears in the Sept. 29 print edition of Transport Topics.

Diesel dropped 2.3 cents last week to $3.778 a gallon, the lowest price in more than two years, the Department of Energy reported.

Diesel, which has risen just twice since April, has plunged 24.3 cents since mid-March and is 17.1 cents below the corresponding week last year.

The national average retail price is the lowest since trucking’s primary fuel averaged $3.695 on July 16, 2012, according to DOE figures.

Gasoline, meanwhile, skidded 5.5 cents to $3.353, the lowest price since February, DOE said Sept. 22 after its weekly survey of filling stations.

Gasoline has plunged 35 cents since June, and last week’s downturn — the biggest single-week decline in 10 months — left it 14.2 cents below the same week last year.

The lower prices have prompted some trucking companies to hedge their fuel purchases and lock in prices, an executive with a Stoughton, Massachusetts-based fueling company said last week.

“The distillate market is the lowest it’s been in about two years, so it’s a very good buying opportunity if you want to lock in some gallons,” said Gus Pesaturo, vice president of operations and supply for Diesel Direct Inc., which supplies fuel to trucking and other industries.

“In the last week or so, we’ve locked in over a million gallons,” he said Sept. 23. “Companies are hedging” their fuel purchases with the low prices, with many securing about a third of their volume, he told Transport Topics.

“We have a variety of customers, including some very large trucking companies,” he said, describing Diesel Direct as “the largest mobile refueler in the country.”

Pesaturo said when a customer recently asked whether diesel prices would climb, “I said I just don’t see it in the market fundamentals, and now’s the time to buy some volume.”

But, he added, “If we have another cold winter, refineries will be busy pushing out [heating oil] and diesel’s going to take a little hit, and the price will go up.”

Meanwhile, an executive with an Indiana-based bulk carrier said his company was spec’ing its trucks for better fuel economy to boost the fleet’s miles per gallon.

“We’re working with engine manufacturers to optimize the parameters and settings for both new and existing engines for the regions our trucks run in,” said John Whittington, vice president of Grammer Industries.

“We are certainly tracking the [mpg] numbers on a more regular basis than we used to,” he said, adding that Grammer is using in-cab heaters in lieu of auxiliary power units.

The carrier is “taking deliveries of new trucks now and we’re definitely getting better fuel mileage on the 2014s [models] than the 2011s,” Whittington said.

“I think the engine manufacturers have come a long way since the implementation of the [selective catalytic reduction technology] engines since 2011,” he told TT.

The bulk hazmat carrier — which runs about 100 company trucks and 100 owner-operators, primarily east of the Mississippi River — also has increased its use of automated manual transmissions, which Whittington said “historically has been a challenge with the tanker industry.”

AMTs “seem to have come a long way. It may not help your best fuel-economy driver, but it certainly brings the lower half up to where they need to be,” he said. “They’ve helped us see some gains, and it’s been effective as a driver recruiting and retention tool.”

The fuel-price downturns came in tandem with falling crude oil prices, which declined last week to their lowest level in more than a year.

Crude oil futures fell 89 cents to $91.52 a barrel on the New York Mercantile Exchange on Sept. 22, the lowest closing price since May 1, 2013, Bloomberg News reported.

They finished higher at $92.53 a barrel on Sept. 25.

And, DOE reported last week that distillate fuel supplies, which include diesel and heating oil, rose 800,000 barrels for the week ended Sept. 19 at 128.6 million barrels, the highest level in almost a year.

Crude inventories fell by 4.3 million barrels, and gasoline supplies declined by 400,000 barrels for the week, DOE’s Energy Information Administration reported Sept. 24.

Separately, hedge funds boosted their net-short wagers on ultra-low-sulfur diesel futures for a fourth week, to the most in U.S. Commodity Futures Trading Commission data that began in 2006, Bloomberg reported Sept. 22.

ULSD futures, which are traded on the Nymex, have dropped 17% since reaching this year’s high Jan. 31, Bloomberg reported.