Diesel Fuel Price Drifts Down to $3.94 Following Fifth Straight Decline

U.S. retail diesel prices dipped 0.8 cent a gallon last week, the fifth consecutive weekly decline, as the national average declined to $3.94, the Department of Energy reported.

Since hitting a high for this year of $4.124 on May 2, diesel has fallen 18.4 cents a gallon, DOE said after its June 6 survey of fueling stations. However, a year ago, the average price was $2.946.

DOE also reported that the average cost of a gallon of retail gasoline dipped 1.3 cents last week to $3.781 a gallon.

It was the fourth consecutive week that gasoline dropped from its high this year — $3.965 on May 9. Gas is now $1.056 a gallon higher than in the corresponding week in 2010.

“There’s plenty of refined product in the United States. Diesel demand in the U.S. is flat,” said Tom Kloza, chief oil analyst for Oil Price Information Service, explaining why pump prices declined last week.

However slight, falling prices were welcome news for the trucking industry.

“When prices are climbing at a rapid rate, we can’t keep up with surcharges,” said Dale Latimer, president of Ram Trucking Inc. in Brownsville, Ore.

“When it finally levels off, like it has this month, it allows us to catch [up], which helps,” said Latimer, who hauls building materials across the lower 48 states in 70 flatbed trucks, half his and half owner-operated.

The most effective tool against high prices, Latimer said, has been to negotiate fuel discounts with truck-stop chains and direct drivers to the cheapest fuel on any given day.

“We actually have an app on our iPhone. . . . They can pull it up on their smart phone, and it’ll tell them what their discount is at each one of the stations on whatever corner they’re at or where the nearest fuel stop is and what the price is,” Latimer said.

At R&M Trucking Co. in suburban Chicago, terminal manager Tony Degani said high fuel costs have convinced the firm to begin an experiment the week of June 13 with diesel additives that are supposed to cut fuel consumption.

“We’re going to try it on six trucks and see if it’s able to improve [mileage],” Degani said.

For the experiment, the firm will try the additive on different types of trucks.

“We took a variety,” said Degani. “We took two tandems, two singles and then two straight trucks.”

R&M, with terminals in Chicago and Milwaukee, runs about 130 trucks, hauling ocean freight forwarded by brokers, as well as freight arriving by air and rail.

One factor that analysts have predicted could send oil prices, and thus diesel prices, higher is the fallout from the June 8 meeting of the OPEC oil ministers.

The ministers startled global oil markets by failing to reach an agreement on a production increase, which oil forecasters predicted would ease high fuel prices.

On June 9, crude oil closed on the New York Mercantile Exchange at $101.93 a barrel, up $1.53 from a week earlier when the closing price for crude on June 2 was $100.40 a barrel. Last year at the same time, crude was selling for about $75 per barrel.

Thus, diesel prices are still high because of the “supply disruptions in places like Libya,” said Andrew Reed, a diesel specialist at Energy Security Analysis Inc.

However, on the upside for truckers worried about renewed price increases, he added, “the weakness in demand for transport fuels in mature economies like the U.S.” is keeping diesel prices from going higher.

Indeed, in its latest outlook published June 7, DOE predicted diesel will average $3.87 a gallon this year, which is 2 cents lower than the department’s previous forecast.

Diesel averaged $2.99 for all of 2010. Next year, the DOE said, trucking’s main fuel will average $3.95 at the pump, another 2-cent drop from earlier estimates.

DOE also said gasoline will average $3.60 a gallon in 2011.