Diesel Drops to $3.894; Gas Price Down by 0.4¢

U.S. diesel prices slipped 3.7 cents to $3.894 a gallon last week, the third straight weekly drop, the Department of Energy reported.

Although the retail average of trucking’s main fuel has fallen 11.6 cents a gallon since Nov. 21, it is still 66.3 cents higher than a year earlier, DOE said after its Dec. 12 survey of filling stations.

Gasoline prices declined for the fourth straight week, dipping 0.4 cents to $3.286 a gallon. Since Nov. 14, gasoline has fallen 15 cents, but remains 30.6 cents higher than the corresponding week of a year ago.

Also last week, the price of crude oil plummeted after the OPEC oil cartel announced it was boosting its production ceiling.

An industry analyst said production increases and higher inventories are the main reasons why diesel declined more than gasoline last week.

“Refiners are focused on diesel rather than gas because diesel is commanding not just a higher price at the retail level, but at the wholesale level as well. And this augments the diesel supply,” said Denton Cinquegrana, senior markets editor at the Oil Price Information Service.

DOE’s Energy Information Administration reported last week that distillate inventories climbed 480,000 barrels in the week ended Dec. 10, the third straight increase.

Distillates stocks increased a total of 5 million barrels over the prior two weeks.

Gasoline inventories have now increased five straight weeks, EIA said.

While welcoming the price drops, carriers said they remained focused on fuel surcharges and new technology and methods to limit fuel expenses.

“A lot of guys don’t have customers who understand that when the price of fuel goes up, you have to charge more,” said Montford Switzer, president of Switzer Transportation Cos., Mount Summit, Ind., which adjusts its fuel surcharges each week. “The customers we haul for know the price fluctuations. So, we’re fortunate that when we have a fuel surcharge, our customers pay it.”

But Switzer Transportation relies on more than fuel surcharges to cover higher fuel costs. Earlier this year, the carrier planned to buy six new Freightliners to improve mileage, but ended up buying eight to maximize fuel savings, Switzer said. The new tractors generate savings of a mile a gallon over older models, he said.

Switzer Transportation also restricts idling speed when its trucks are loading and unloading petroleum and now saves 66% of the fuel it burned previously during such operations. “We had to change power takeoffs on direct drive units,” he said. “It’s quite an expense, but if you do the math, it’s there.”

The company operates 20 tank trucks and began cutting the idle speed on 12 older models earlier this year.

Switzer Transportation, which also operates flatbed hauler Switzer Transport Inc., serves central Indiana and surrounding states.

Midwest Motor Express Inc. has outsourced fuel buying to a third party, which purchases diesel in bulk to obtain discounts, according to Chairman John Roswick. The outside company, which Roswick declined to identify, takes a percentage of any fuel discounts it achieves, he said.

Midwest, a Bismarck, N.D., carrier, just finished testing super single tires on tractors and trailers to improve aerodynamics. Super singles replace dual tires, lessening weight and improving fuel efficiency.

“It works out as long as the roads are dry,” Roswick said. “This is pretty popular with a lot of fleets, but it’s not something you do overnight.” Midwest has more than 200 tractors, Roswick said.

Meanwhile, crude oil on the New York Mercantile Exchange closed at about $95 a barrel on Dec. 14, down more than $5 from the prior day. The decline followed OPEC’s announcement it was raising its production ceiling to 30 million barrels a day, the first change in three years, Bloomberg News reported. That target is generally the amount the nations in the cartel are believed to currently be producing.