Diesel Falls 11.5¢ to $4.603

The national average retail price of diesel fell 11.5 cents to $4.603 a gallon last week, the largest one-week drop in nearly two years and the second consecutive weekly decline, the Department of Energy reported.

Diesel has fallen 16.1 cents a gallon since hitting a record high of $4.764 on July 7. Last week’s decline was the biggest since an 11.8-cent dip on Sept. 25, 2006.

The national average price for regular gasoline fell 10.9 cents a gallon to $3.955 last week, the first time since June 2 that the average was less than $4, DOE said after its July 28 survey of fueling stations.

Industry observers said they expect downward pressure on pump prices to continue as fuel demand falls in the United States, the world’s largest market for refined petroleum products.

“The fuel [price] situation is easing right now,” said Eric Starks, president of consulting firm FTR Associates in Nashville, Ind.

“But we’re still talking about $120- to $125-a-barrel oil, which is where we were in May. That still puts pressure on the overall economy and transportation in general,” he said.

Even with the decline in prices, however, diesel remains $1.717 a gallon higher than the corresponding time a year ago. Gasoline is $1.079 cents a gallon higher than it was in 2007.

The increases added $1.5 billion to the cost of fuel purchased by trucking companies in the United States, based on estimates by American Trucking Associations.

To compensate for higher fuel costs, Dino Guadagni, vice president of Western Distributing in Denver, said his company added in-cab devices to track fuel use and reward drivers based on miles per gallon and idling-time reductions.

“We’ve been measuring driver performance for the last three or four years and last year, we got serious. We generate highly detailed, monthly snapshots. We’ve got a 0.4 to 0.5 mile-per-gallon improvement already.”

In one fleet of 62 trucks, management limited the speed to 70 miles per hour, resulting in a 0.2-mile-per-gallon increase in fuel efficiency and saving about $10,000 a month per truck.

Although some drivers quit because of the speed restrictions, Guadagni said, most have made the adjustment.

“I call them rocket guys, and you can’t change that mentality,” Guadagni said of the former drivers.

The reprieve from rising prices will allow some truckers to catch up on fuel surcharges, Starks said.

“They won’t have to be chasing rising fuel costs,” Starks said. “If prices hover in this range, it will not be a further hindrance. It’s not the absolute level [of fuel prices] that kills you; it’s the change in price. If this is the new norm, everybody can adjust. If you see those $20, $25 or $30 increases, that is hard to take.”

The unprecedented level of fuel prices has been dampening demand.

The U.S. Energy Information Administration said U.S. petroleum demand in May — 19.7 million barrels a day — was the lowest for any month in five years. Demand for gasoline dropped 2.3%, compared with May 2007, and demand for distillate fuels, which include diesel, was off 3.2%.

May was the 10th consecutive month of year-to-year decline in U.S. demand, the longest since the 12 months between September 1990 and August 1991, according to a report issued July 29 by the Oil Price Information Service.

Contracts for September delivery of light, sweet crude closed at $126.77 a barrel in electronic trading July 30 on the New York Mercantile Exchange. Crude oil prices have fallen about 13% since reaching a record high of $145.29 a barrel on July 3.

An increase in the value of the U.S. dollar last week against the euro and yen helped to offset supply concerns sparked by the sabotage of two oil pipelines by militants in Nigeria, The Associated Press reported.

Victor Shum, an energy analyst in Singapore, said the attacks in Nigeria simply kept oil prices from slipping further, based on concern that high fuel prices have hurt demand in the United States and increasing uncertainty over the global economy.

“Pricing in the near term looks quite stable around the $125 level,” Shum said.