Diesel Fuel Ends Year at $3.791 as Refineries Ramp Up Output

Diesel fuel prices tumbled more than 10 cents during the final two weeks of 2011, the Department of Energy reported, as refineries continued ramping up production.

The national diesel fuel average dipped 3.7 cents a gallon to $3.791 on Dec. 26, which followed a drop of 6.6 cents the prior week.

Since moving back above $4 a gallon during November, diesel has fallen a total of 21.9 cents over the past five weeks. However, the fuel average still closed 2011 49.7 cents higher than it was at the end of 2010, according to DOE data.

The agency also said gasoline prices rose 2.9 cents to $3.258 a gallon on Dec. 26, which was the first increase since Nov. 14. For the previous week, reported on Dec. 19, the gasoline average slid 5.7 cents to $3.229.

Although gasoline prices have declined a cumulative 17.8 cents over the past six weeks, they are still 20.6 cents higher than they were at the end of 2010.

DOE’s latest average gas price was also 70.7 cents below the 2011 high of $3.965, reached on May 9.

The price of crude oil on the New York Mercantile Exchange also remained near the $100 a barrel mark as 2011 closed because of European financial uncertainty and political concerns in the Middle East, Bloomberg News reported.

Despite rising oil prices, Phil Flynn, a senior market analyst for Chicago futures brokerage PFGBest, told Transport Topics that diesel prices were falling because unseasonably high temperatures have been allowing refineries to produce more diesel, rather than heating oil, from distillate stocks.

DOE’s Energy Information Administration also reported that total domestic distillate output was 4.4 million barrels a day for the week of Dec. 16, up from 3.24 million barrels a day the week of Nov. 25.

Despite the positive trend, trucking executives said they were remaining cautious on fuel prices as 2012 began.

“We’re only one cold snap in the Northeast from going the other way,” said Greg Swift, vice president at refrigerated hauler Swift Carriers Inc., Marshall, Mo.

He also suggested that diesel would increase with higher demand if the U.S. economy continues to pick up.

Steve Johnson, vice president of Santa Clara Transfer Service Inc., Castroville, Calif., said he is concerned about diesel price increases in 2012 hurting his bottom line.

“If you have fuel surcharges, [shippers] want them included so they can guarantee the rate for the whole year,” Johnson said.

However, when diesel spikes quickly, he added, a surcharge won’t cover the increase to run trucks, so “it’s cheaper to park them in the yard than run them on the road.”

When some shippers balk at additional fuel charges, Johnson said, his company has little choice but to eat a diesel price rise for 30 days and then cancel the contract, he said.

Santa Clara Transfer operates 18 tractors that haul cement, asphalt and manufacturing sands, such as material used in glassmaking.

Johnson said his company tried to save more on fuel by purchasing aerodynamic tractors, but it lost any expected fuel savings. Trailer skirts and tails do not improve mileage, he said, because profiles of the pneumatic, hopper and asphalt trailers his company uses are so high, they catch the wind.

Meanwhile, in late December, oil rose for seven straight days — and briefly topped $101 a barrel — before declining on Dec. 28 after Europe’s Central Bank loaned cash to several financial institutions to keep credit flowing, Bloomberg reported.

Besides concerns about Europe, Iran’s threats to close the Straits of Hormuz and political upheaval in Russia also were blamed for the price increases, Bloomberg reported.

PFGBest’s Flynn noted that crude supplies at a three-year low in the United States, which also was keeping prices elevated.