Diesel Gains 1¢ to $3.82; First Increase in Five Weeks

U.S retail diesel prices rose last week for the first time in five weeks, as the Department of Energy reported that the national average cost rose 1 cent to $3.82 a gallon.

Commercial trucking’s main fuel had fallen 12.9 cents over the past month and is now 30.4 cents below the two-year high of $4.124 set on May 2, DOE said Aug. 29 after its weekly survey of fueling stations.

However, the average is still well above its year-ago level of $2.938.

DOE also said that the regular gasoline average rose 4.6 cents to $3.627 a gallon last week. Gasoline had dropped 8.4 cents during the prior four weeks, however.

Like diesel, gasoline began rising in price late last year, reaching a two-year high of $3.965 a gallon on May 9. In the last week of August 2010, the average gallon of gasoline cost $2.682.

Although U.S. diesel demand is not robust, a boom in distillate exports is preventing a larger drop at the pump, analysts said.

Distillate inventories are “lower than last summer and, if you look at the weekly changes, there really weren’t steady builds,” said Andrew Reed, a diesel market specialist at the Wakefield, Mass., office of Energy Security Analysis Inc.

DOE said distillate stockpiles as of Aug. 26 were at 156.1 million barrels, compared with 175.2 million the comparable period last year. Distillate exports for the first six months of 2011 have averaged 730,000 barrels a day, a 32% increase over the same period last year, DOE said.

For carriers, the rise in diesel prices means hewing to a routine that manages fuel costs.

“We govern all our trucks [at 62 mph], so we keep the top end speed down,” said Andy Owens Jr., vice president of operations at A&M Transport in Glendale, Ore.

“We try to minimize idle time and we service them regularly and monitor any truck that’s getting bad fuel consumption reports,” said Owens, the second of three generations who own and operate a fleet of 150 dry vans, flatbeds and Tautliners.

Without fuel surcharges, however, A&M, which largely runs Interstate 5, would not be in business, Owens said.

A shipper paying A&M a low fuel surcharge pays a higher linehaul rate, he said.

“I know what my all-end rate has to be to be successful here,” Owens added.

Unlike some carriers, A&M has no bonus program for drivers who keep fuel use down, but the carrier does offer a bonus for those who maintain low Compliance, Safety, Accountability scores.

“If they’re getting bad fuel mileage, it’s because of their aggressive driving skills, which proportionally is going to come around and affect their CSA score,” Owens said.

Drivers are also critical in holding down fuel costs at WTI Transport in Tuscaloosa, Ala., said vice president of operations Darren Lee.

“We went through the progressive shifting with the drivers, working with them on that,” said Lee. “We went through the guys making sure they watch their speeds. . . . We spend a lot more time with our guys, talking to them about idle time still.”

The flatbed fleet of 300 is largely equipped with auxiliary power units to keep drivers cool in summer without running engines, Lee said.

WTI also gives bonuses to drivers who meet specific benchmarks for miles per gallon, he said.

“The majority of the drivers that don’t hit it, they’re on the phone wanting to know, ‘Hey, what happened,’ ” Lee said.

“Before you know it, they’ll be in our shop wanting to have machines hooked up. . . . They’re proactive as well. You got to have them part of it,” he said.

Looking ahead, diesel is unlikely to fall much, said Tom Kloza, chief oil analyst with the Oil Price Information Service.

The United States has become such a large exporter of diesel, Kloza said, that demand for the fuel here is not as strong a factor in setting the price.

“We’ve really become the supplier to Central and South America and that’s kind of the untold story this summer,” he said.

Also last week, the price of crude oil closed at $88.93 on the New York Mercantile Exchange on Sept. 1. During that trading session, the price rose to $89.90, the highest level since Aug. 4.