Diesel Fuel Price Rises After Five Consecutive Weekly Declines

Reversing five weeks of decline, the average price of a gallon of diesel rose 1.4 cents a gallon last week to $3.954, the Department of Energy reported.

At the same time, the retail gasoline average price dropped 6.8 cents to $3.713, DOE said after its June 13 weekly survey of fueling stations.

Diesel has now dropped 17 cents since May 2, when it hit a peak for the year of $4.124 a gallon. A year ago, diesel stood at $2.928 and gasoline at $2.701.

Last week’s rising diesel and falling gasoline prices reversed the normal pattern this time of year. Diesel usually falls when demand for heating oil wanes, while gasoline traditionally rises during the summer vacation driving season.

“One of the issues is that the gasoline price had really been inflated because of the situation on the East Coast, where gasoline inventories had fallen,” said Tancred Lidderdale, a senior economist at DOE’s Energy Information Administration.

Unexpected refinery outages in April and Mississippi River flooding in May that disrupted oil barge traffic shrank inventories, putting “a premium on gasoline that diesel prices didn’t see,” said Lidderdale.

Last week’s increase in diesel is disappointing to truckers, who said they are running out of ways to control fuel costs.

“Trailer skirts are the next thing,” said Sam Petersen, who with wife Synnove Petersen owns M. Bjorn Petersen Transportation in Glendale, Ariz., a fleet of 50 refrigerated trucks hauling produce across the lower 48 states.

Three years ago, Petersen switched his fleet to double wide tires in order to raise his miles per gallon.

“We have 6.2 [mpg] and we came from 5.6,” he said.

Switching to the wider tires, however, meant he must scrupulously monitor the air pressure for optimum fuel savings, Petersen said.

He is still studying what trailer skirts would do for his fleet, but said his calculations indicate “we should gain about 6% [in mpg].”

His most effective tool against high diesel prices is still weekly adjustments to his fuel surcharge, Petersen said.

“We don’t have an option. We add it onto the invoices or we close our doors,” he said.

Bob Ramorino, president of Roadstar Trucking Inc. in Hayward, Calif., said he adjusts most surcharges weekly, but with this year’s high diesel prices, shippers try to negotiate around them.

“They don’t ask about the fuel surcharge,” Ramorino said. “They just say, ‘Here’s my delivered price for this load, do you want to do it?’ And sometimes this is longer term business. This isn’t spot business.”

Ramorino also said he has some annual shipping contracts with surcharges but “as those contracts come up, I’m starting to change them to a weekly, like we do on our regular freight.”

Like Petersen, Ramorino said he is running out of tools that will help his shorthaul fleet save fuel.

“They are very marginal without a big technology change,” said Ramorino, a past chairman of the California Trucking Association.

“There’s the talk about we need to get into alternate forms of energy, but that’s beyond the reach of most small carriers,” he said, adding that he is interested in liquefied natural gas trucks.

“The problem is that truck probably costs two to three times the cost of a brand new diesel truck,” he said.

Phil Flynn, a senior market analyst at PFG Best, said there are demand pressures on diesel and crude oil that will keep their price high.

For example, “The demand in China is going to be stronger than normal because of the droughts [there],” Flynn said. “The hydroelectric plants in China are being shut down . . . so the factories are importing extra diesel to keep [them] online.”

Meanwhile, the price of crude oil closed just under $95 a barrel on June 16 on the New York Mercantile Exchange, the lowest since Feb. 22. Last year on June 16, a barrel of crude oil on the NYMEX was trading at $77.67.