Diesel Fuel Jumps 11.5¢ to $3.965 a Gallon

This story appears in the Aug. 20 print edition of Transport Topics.

U.S. retail diesel prices spiked 11.5 cents to $3.965 a gallon last week, the Department of Energy reported, the largest increase in 17 months. Experts attributed the gain to higher crude prices, falling inventories and a refinery fire.

It was diesel’s sixth consecutive week-to-week increase and the largest since a 15.5-cent jump in March 2011.

Retail gasoline prices also rose for the sixth straight week, climbing 7.6 cents to $3.721, following a 13.7-cent jump the week before, DOE said after its Aug. 13 survey of fueling stations.

“There has been a massive rally in crude oil since early July,” said Stephen Schork, president of the Schork Group, a energy consultant firm in Villanova, Pa. “It’s spilling over to diesel and gas prices.”

West Texas Intermediate Crude, the U.S. benchmark, has climbed about $12 per barrel, or 14%, since July 2, closing at $95.60 on Aug. 16. Diesel has followed suit, climbing 9%, or 31.8 cents per gallon, since early July.

Diesel is up 13 cents a gallon from $3.835 a year ago, while gasoline prices have gained 11.7 cents over the same period, from $3.604.

“We definitely don’t like the increase,” Josh Kaburick, chief operating officer of refrigerated fleet Earl Henderson Trucking, Salem, Ill., told Transport Topics. “That kind of increase hurts and is a challenge to deal with.”

“Our fuel comes from California — we don’t have a choice,” said Ed Meyer, president of Nev/Cal Trucking, based in Reno, Nev. “It would be great if we had a pipeline.”

Meyer said his company’s price for diesel rose 20 cents a gallon in a single week.

Schork said fuel prices on the West Coast were affected by a refinery fire at a Chevron facility in Richmond, Calif., on Aug. 6.

The increase seen by Nev/Cal slightly exceeded the average gain

of 19.3 cents to $4.152 in DOE’s West Coast region. Elsewhere, the increases were lower, including just 6.5 cents per gallon in New England.

Schork also said that low inventories are affecting pump prices.

Nationwide inventories of distillates, which are used to produce diesel, are lower than the bottom point of the five-year average, DOE said. The distillate inventory has been reduced by 19% since the same week of 2011 to 124.2 million barrels. Crude oil inventories declined 3.7 million barrels, or about 1%.

Cost savings such as wider use of technology remain a mainstay when fuel can be a fleet’s largest single cost.

Ron Massman, CEO of Dependable Cos., Los Angeles, told TT his company installed new equipment on all of its over-the-road tractors in an effort to closely monitor speed, acceleration and idle times.

He said the company is still evaluating the precise savings, but the cost reductions were “meaningful enough to justify buying these devices.”

“We continue working with equipment manufacturers on aerodynamics, but the biggest factor is driver habit — knowing what is the best way to drive and being fuel efficient,” said Kaburick of Earl Henderson Trucking.

He also has chosen two drivers as “champions,” who perform exceptionally well on fuel economy metrics. They are used to help coach drivers whose performance lags.

“We look every week at those who perform well and don’t perform so well,” Kaburick said.

The company also pays incentives that primarily are based on fuel-economy performance, he added, enabling drivers who increase pay in cents per mile.

“We are constantly monitoring what trucks and drivers aren’t performing like they can,” Nev/Cal’s Meyer said. “We are constantly looking at every option.”

He said the company is buying an additional 20,000-gallon fuel tank to help control costs, though Meyer said his company is too small to engage in diesel price hedging.

Nev/Cal, Dependable and Henderson also rely on fuel surcharges.

“Like most carriers, we increase or decrease fuel surcharges based on the price of fuel,” Massman said. “We do pass along price increases. We take a little bit of a hit the first week when prices rise, until we can adjust the fuel surcharge the following week.”

Meyer said Nev/Cal and its 88-tractor fleet can’t recover the difference when fuel climbs because carriers pay for fuel daily and can only change the surcharge weekly.

“We are constantly evaluating and managing fuel surcharges,” said Kaburick, whose company runs 400 trucks. “Unfortunately for us, fuel surcharges only recover about 80% of our costs. As fuel increases, that gap widens.”

Alternative fuels also are attracting more attention.

Massman said Dependable uses liquefied natural gas trucks in its California port drayage operations, saying “they are working out fine.”

Henderson also is exploring natural gas-powered tractors at a time when diesel prices keep climbing and natural gas equivalents remain about $2 per gallon lower.

“We have had many, many meetings and conversations with both OEs and those who are building the fueling network,” Kaburick added.