Diesel Fuel Price Slips 1.2¢ Following 3-Week Increase
This story appears in the Aug. 23 print edition of Transport Topics.
In the face of record-setting petroleum stockpiles, the U.S. retail diesel price average dipped 1.2 cents to $2.979 a gallon, the Department of Energy reported.
The decline followed a three-week run-up where diesel reached $2.991, its highest price since late May, DOE said after its Aug. 16 survey of fueling stations.
The gasoline average dropped 3.8 cents to $2.745 a gallon, DOE said, after reaching a high for the summer of $2.783 on Aug. 9.
“I don’t think . . . we should be surprised prices are coming down,” said Phil Flynn, chief energy analyst at the brokerage firm PFGBest, Chicago. “We probably should be surprised . . . they went back up a couple of weeks ago.”
Despite last week’s price declines, diesel is still 32.7 cents higher than a year earlier, while gasoline is 10.8 cents above the corresponding week in 2009.
Total U.S. inventories of crude and petroleum products are at 1.13 billion barrels, a level not seen in at least 20 years, DOE’s Energy Information Administration said Aug. 18.
Inventories of distillate fuel, from which diesel is produced, are 174.2 million barrels, the highest since January 1983, EIA said.
An end to the price run-up was welcome news at Beaver Express Service in Woodward, Okla., said Mike Stone, majority owner and chief executive officer.
Because Beaver is a less-than-truckload and small-package carrier, its key weapon against price run-ups is a fuel surcharge, which Stone said he scrupulously adjusts every Tuesday morning.
“It’s just that important to our company that we make sure that we stay on top of [it],” said Stone, the third-generation of Stones to run Beaver. “There’s a lot of dollars in fuel. You’ve got to pay attention to it.”
Fuel-saving strategies, such as auxiliary power units, that help other firms do not work for Beaver, Stone said. Beaver runs 365 trucks on mostly regular day routes.
Stone said, “In July we spent $293,000 [on diesel] and that compares to $245,000 a year ago in July.”
The highest average diesel sold for last summer — during June, July and August — was $2.674 a gallon, compared with a high of $2.991 during the same months this year.
The dip in fuel prices was foreshadowed the past two weeks by declining crude oil prices, said Chris Barber, an oil market analyst in the Wakefield, Mass., offices of Energy Security Analysis Inc.
On Aug. 19 crude prices fell to their lowest level in six weeks when the per barrel price settled at $74.43 on the New York Merchantile Exchange, continuing a decline that began the first week of August when crude had been selling for more than $80 a barrel.
Diesel prices, said Flynn, are “caught up in that macroeconomic chess game that’s been going back and forth when we run the line between economic optimism and economic doom and gloom.”
To counter the swing in fuel prices, firms such as Birchwood Transport Inc. in Kenosha, Wis., enter the oil markets, said Mike Marquardt, the carrier’s vice president.
“We’ve done little things like forward buying or contracting our fuel. While that’s somewhat speculative and is a little bit risky, it takes some of the bumps out of the road, so to speak,” said Marquardt, who is secretary of the Wisconsin Motor Carriers Association.
Trucking, he said, is “pretty fortunate” that surcharges smooth the spikes in price and that shippers accept the surcharges.
“But I think, as life goes on, shippers are going to start to demand that we try to take the spike out of that, so we have to get better at speculating and hedging and that type of thing,” Marquardt said.
Birchwood runs 75 tractors and about 125 refrigerated trailers, hauling mostly beef in the eastern states, so about 75% of its drivers are out days at a time.
Birchwood has not invested in APUs but is carefully watching the advances in technology, Marquardt said.
“Currently, most of them are managed by a smaller diesel engine,” he said. Battery versions “are starting to come out, and as that gets a little bit perfected, that’s what we’ll move to.”
Marquardt said Birchwood also tracks advances in fuel-saving, aerodynamic truck designs to guide it in purchases. In the meantime, he said, the firm counts on drivers to get the best mileage possible.
Trucks do have “programmable bonus” programs in the engines so that, if drivers use “progressive shifting” and are conservative on their idling time, Marquardt said, the truck automatically allows a driver to go from 65 to 70 miles an hour.
