Diesel Gains 5.4¢ to $3.85

This story appears in the Aug. 13 print edition of Transport Topics.

U.S. retail diesel prices rose 5.4 cents last week to $3.85 a gallon, while gasoline soared 13.7 cents, the Department of Energy reported, after a pipeline leak in Wisconsin raised fears of a crude oil shortage.

For diesel, it was the fifth consecutive week of increases totaling 20.2 cents, DOE said after its Aug. 6 survey of fueling stations. A year ago, diesel was $3.897.

Retail gasoline spiked to $3.645, up from $3.508 the previous week, DOE said. Last week’s increase was the largest since March 7, 2011, when gasoline also increased 13.7 cents.

Like diesel, gasoline has risen five straight weeks, and is now 2.9 cents below year-ago levels.

The increase in pump prices, especially gasoline, was linked to an event in a Midwestern field, said Timothy Hess, an oil analyst at DOE’s Energy Information Administration.

A pipeline owned by Enbridge Energy Partners carrying crude oil from Canada to Chicago-area refineries sprung a leak in Wisconsin on July 27.

The spill was not large, but fuel suppliers raised prices on expectations the line “would be closed for maybe weeks, to possibly months,” Hess said.

“When stuff hits that area, it sometimes tends to have a bigger impact on gasoline prices than on diesel,” Hess said. On Aug. 6, Enbridge reopened the line. The news didn’t get to retailers right away “but took some pressure off Chicago-area spot prices,” Hess said.

The incident drove diesel up 6.9 cents in the Midwest, 1.5 cents higher than the national average, reported by DOE. Gasoline jumped 25.7 cents in the Midwest.

Beyond the spill, analysts said falling inventories also pushed up crude and pump prices.

The day after the pipeline reopened, Tom Franey, owner of Tom Franey Trucking Inc., said he watched the wholesale price of gasoline drop 24 cents near his terminal in Champaign, Ill.

Franey, which runs 20 tank trucks hauling fuel from refineries to filling stations chains around Illinois, said he didn’t worry about his own fuel costs as diesel prices rose last week.

“I raise my fuel surcharge; I mean, we haul fuel,” he said. “There’s no arguing with my customers about what it costs. Of course we try and save fuel wherever we can — aerodynamics, no idling — but that’s really just a drop in the bucket,” he said.

The pipeline incident did change the way Franey’s fleet did business.

“From a carrier standpoint, all my customers were looking for cheaper product,” he said. “My customers could afford to have me haul it 200 miles.”

If wholesale gasoline was 25 cents cheaper in Iowa or Indiana, Franey said, customers sent his trucks there to haul the fuel back to central Illinois.

“When we have to travel twice as far to get product, we can’t get as much work done so we were super busy,” he said.

At MC Express Inc., a dry-van carrier in Jonesboro, Ark., operations manager Neal McDonald said his company focuses on regional diesel price movements.

“We’ve tried to avoid fueling in the upper New England states,” McDonald said. “It’s cheaper in the South, the Midwest. And then when you’re in California, you’re pretty well stuck . . . so we try to fuel in Arizona before we get to California.”

McDonald said MC Express’ biggest fuel savings is in its new fleet — 85 trucks and 200 trailers purchased in the past six months.

“We purchased all new trucks, the most fuel efficient trucks you can get,” he said. “We purchased new trailers that have the side skirts.”

As a result, fuel mileage is rising, compensating for the purchase cost, McDonald said. He estimated miles per gallon at 6.7 to 6.8, compared with 6 mpg before the new equipment.

DOE reported crude stockpiles totaled 369.9 million barrels on Aug. 3, down 3.7 million barrels from the previous week. Stocks are still above the normal range. Distillate stocks were down to 123.5 million barrels on Aug. 3, from 124.3 a week earlier, and gasoline stockpiles stood at 206.1 million barrels, down from 207.9 million barrels.

Crude prices have advanced in recent weeks, reaching $93.36 a barrel on the New York Mercantile Exchange, the highest level since May 15, when crude closed at $93.98.

Chris Barber of Energy Security Analysis Inc. also said a positive jobs report (see story, p. 6) may explain crude’s brief upswing.