Diesel Drops 6.5¢, Most Since December

Retail diesel prices dropped for the ninth week in a row, and analysts said they could fall even more as the national average declined 6.5 cents to $3.781 a gallon last week, the Energy Department reported. It was the largest one-week decline since Dec. 19.

The latest slide leaves trucking’s main fuel 36.7 cents cheaper than it was on April 9 and 17.3 cents cheaper than it was at the comparable time in 2011, according to DOE figures.

The average price of gasoline decreased 4 cents to $3.572 per gallon, which is the lowest since Feb. 13, DOE said. It was the 10th straight decline for gasoline, and the average price also has fallen 36.7 cents since April 9. Gasoline is 14.1 cents less expensive than it was a year ago.

“In the next few weeks, you may be seeing the lowest diesel prices of the year,” said Denton Cinquegrana, senior markets editor at the Oil Price Information Service. “In fact, the way this market has been trending, you may see this within the next couple of days,” he said June 12.

“We hope to continue seeing it go down,” said Steven Kroon, president of Kroon Brothers Transport LLC, a one-truck outfit in Hanover, Pa., that started up in March.

Kroon recalled when the price of diesel began spiking in April, his company, which he runs with his wife, Kayla, and one driver, barely survived. With diesel prices now dropping, Kroon said he’s hoping he can obtain financing to buy four or five more tractors.

In the meantime, a second analyst said he foresees a few more declines for diesel.

Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Conn., said he also thinks that the price of diesel could decline a little further. But he said a significant price drop is unlikely, barring an economic crisis.

Although prices normally rise during the summer driving season, Cinquegrana said many U.S. refineries will keep operating and, if demand rises, diesel and gasoline refiners can avail themselves of cheap Canadian crude, which will keep retail prices down.

McGillian said he attributes the steady erosion in diesel pump prices to lax demand in gasoline and diesel because of warmer weather and an overall retreat in crude oil prices.

Fleet managers said the decline in diesel is giving them a much-needed breathing spell to catch up from the sharp price jumps of April.

“When the price climbs, it always gets very tight for us. When it comes back down, what we lost on the upswing we can make back,” said Don Fedoronko, president of dry van carrier Churchill Transportation Inc., based in Detroit.

The company runs 130 tractors and has 75 company drivers. The rest are owner operators, he said.

But Fedoronko said that diesel prices will go down only so much and he believes they may reach the level before they skyrocketed in the spring.

Diesel began a steady advance on Jan. 30 and rose nine straight weeks before declining 0.5 cent on April 2 and then gaining 0.6 cent to reach a yearly high of $4.148 on April 9.

Like all energy analysts, Cinquegrana said it’s the falling price of crude oil that is pulling down diesel prices. Crude’s price drop has been propelled by signs that China’s economy is slowing, by the possibility that the United States could be headed for another recession and by the continuing financial tumult in Europe. “A lot of people are worried in the investment industry,” Cinquegrana said.

Fedoronko said he also believes the price of diesel is governed by global events outside their control: “Fuel is fueled by crisis, and whatever the next crisis is may push it back up.”

Crude closed on the New York Mercantile Exchange at $83.85 on June 14.

“A few years ago, few would have considered oil at $83 as cheap. But analysts are now heralding this low price as Saudi Arabia’s global stimulus plan,” Tom Moore, principal in transportation and logistics consultancy Moore & Associates, Franklin, Tenn., wrote in his weekly note on diesel and crude prices.