Diesel Fuel Rises 3.7¢ to $3.331

This story appears in the Jan. 10 print edition of Transport Topics.

The average price of U.S. retail diesel rose another 3.7 cents last week to $3.331 a gallon, the Department of Energy reported, or 26.4 cents higher than it was two months ago.

Diesel, which is at its highest level since October 2008, is also 53.4 cents above the comparable week of last year. Since remaining steady in early November, pump prices have skyrocketed.

The regular-gasoline price average increased as well, rising 1.8 cents to $3.07 a gallon, also its highest price since October 2008, DOE said after its Jan. 3 survey of fueling stations. The gasoline average is 40.5 cents higher than the corresponding week in 2010.

“It’s the usual story that has been going on since before Thanksgiving — a steady rise in world crude oil prices,” Tancred Lidderdale, senior economist at DOE’s Energy Information Administration, told Transport Topics.

Since bottoming out at $80.44 a barrel on Nov. 17 on the New York Mercantile Exchange, crude oil has been on a steady climb, reaching $91.55 on Jan. 3, Bloomberg News reported. On Jan. 6, it closed at $88.38.

“That increase in price in crude oil has been driven, in large part, by declines observed in world inventories and enhanced expectations of world demand growth,” Lidderdale said.

Brad Simons, president of Pathway Network, the truck fuel subsidiary of Simons Petroleum, Oklahoma City, said $90 crude has pushed some trucking firms to take out insurance against even higher fuel costs.

“I think, now that we’re at $90 a barrel, that is the short-term top of the range . . . but when you’re looking at a $90 crude price — we can all remember 2008 when crude went from $120 to nearly $150 in a blink — and more trucking firms are willing to pay for a ‘cap,’ ” Simons told TT.

He explained that a “cap” allows a fuel purchaser to pay a premium to ensure that the firm would not pay more than current prices for a defined period in the future, but it would permit the company to pay lower prices if the diesel price fell.

If a company locks in fuel at the current price, the firm would have to pay that price even if diesel falls significantly in coming months, he said.

“Buying a cap can mean paying two or three cents more per gallon, but more trucking firms than in the past are willing to do that,” Simons said.

Royal Jones, CEO of Mesilla Valley Transportation, Las Cruces, N.M., said his company takes several steps to save on fuel, regardless of the price at the pump.

Jones said MVT fixes the fifth wheels on its trucks as far forward as possible to minimize aerodynamic drag between the tractor and trailer. The carrier uses wide-base tires with low rolling resistance, skirting on the sides of trailers and boat tails behind.

Tractor speed is governed at 65 miles per hour, down from 68 mph previously. Every tractor has an auxiliary power unit, and there are driver training programs and a fuel incentive bonus plan.

“We check the mileage daily from each engine control module and look at an exception report. We monitor everything,” said Jones, who added that poorly performing tractors are sent for maintenance to boost mileage.

MVT, which ranks No. 74 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers, does longhaul, dry van truckload throughout the contiguous 48 states, with 1,100 tractors.

Ronnie Kent, vice president of operations for regional bulk carrier Evergreen Transport, Evergreen, Ala., said the company has moved to protect itself against rising fuel prices.

“We buy our fuel in bulk at 20 cents a gallon less than retail for four of our locations, and we’re fueling 95% of our operations that way, so that we save a lot,” Kent told TT.

He said that Evergreen had 150 tractors that mostly pull bulk pneumatic trailers carrying lime and cement.

Evergreen orders two 150-gallon diesel tanks on its new tractors that go on longer routes, carrying 100 gallons more diesel than standard trucks.

“We ‘spec’ our trucks pretty light, so that we can usually carry the same weight,” he explained. “We can send trucks carrying 300 gallons as far as New Jersey or Wisconsin, and drivers can nearly make the entire trip on one tank, maybe having to put in only 20 or 25 gallons.”

He said that Evergreen trucks can routinely make 1,600 miles on 300 gallons, and up to 1,800 miles on some routes.