Diesel Gains 4.3¢ to $4.094 a Gallon

This story appears in the March 12 print edition of Transport Topics.

Retail diesel prices advanced an additional 4.3 cents a gallon to a national average of $4.094 last week, a level not seen in 10 months, the U.S. Department of Energy reported.

Six straight weeks of steadily rising prices left truckers paying an average 31 cents a gallon more for diesel than they paid at the start of 2012, DOE said after its March 5 survey of fueling stations.

Diesel is now 22.3 cents higher than a year earlier and at its highest price since May 9, when it was $4.104.

The retail gasoline average jumped 7.2 cents last week, to $3.793 a gallon, compared with $3.299 at the start of 2012. It is now 27.3 cents higher than a year earlier.

Traders deserve as much blame for the high fuel and crude oil prices as Iranian threats to disrupt the world’s oil supply, said Tom Kloza, chief analyst of the Oil Price Information Service, Wall, N.J.

“The trading world is still convinced that demand from developing countries, particularly in Asia but also in South America, is going to more than offset the lower demand from the United States and Europe,” Kloza said.

United States demand for oil products averaged 18.3 million barrels a day in February, down from 19.6 million barrels a day in February 2011, DOE said.

Crude oil, however, closed at $106.58 a barrel on March 8 on the New York Mercantile Exchange, up 42 cents from the previous day.

Regarding fuel prices, Al Garcia, founder of Alto Systems, Inc., a Pomona, Calif., warehouse, distribution and trucking firm, operates in one tough market.

“I’m strictly a California-run operation, so sometimes we find ourselves competing with companies running interstate,” Garcia said.

The competitors buy fuel before they enter and after they leave, he said. California’s diesel average was $4.45 a gallon last week, 36 cents higher than the national average.

Garcia, a former California Trucking Association president, said he is following a strategy several California carriers are exploring. He recently added two natural gas-powered trucks to his 20-unit fleet.

“The thinking is that the price of diesel and the effect that it has on the industry . . . we’re just trying to be forward-thinkers and say, ‘Hey, we’ve got to have alternative fuel options,’ ’’ Garcia said.

It is too early to tell what emissions and fuel savings the new trucks will produce, he said, but other than his fuel surcharge, he has few options for dealing with rising diesel prices.

“I don’t have that many highway miles,” Garcia said. His trucks are distributing cargo along mostly stop-and-go crowded urban corridors, he said.

The investment was costly, about $40,000 more for each natural-gas truck than for a diesel-powered truck, he said. That cost barrier, he added, means that in California, at least, larger fleets that have more capital and can buy in volume are leading the way on natural-gas trucks.

Farther north, in Hayward, on the eastern side of the San Francisco Bay, another former California Trucking Association president, Bob Ramorino, said rising diesel prices set him to exploring the natural gas option more than a year ago.

Ramorino runs his family’s firm, Roadstar Trucking Inc., another short haul fleet of about 40 trucks serving a largely urban area.

“Most of our operation is within a 100-mile radius,” he said of what he called his “last-mile” fleet.

Ramorino said that the more he looks “at how we’re held hostage to the oil situation, and the price fluctuations in diesel,” the more interested he is in natural-gas trucks.

“But the pricing has got to come way down,” he added. “You’ve got to get that differential down [between diesel and natural-gas trucks] for small fleets like mine.”

To help cut down on current fuel prices, Roadstar has a diesel tank at its terminal so it can buy fuel in bulk. And shippers pay a fuel surcharge, although it does not always cover California fuel costs.

“The disheartening thing is most of our national shippers have put us on the national fuel surcharge schedules,” Ramorino said.