Diesel Gains 6.7¢ to $3.892 a Gallon

This story appears in the Nov. 7 print edition of Transport Topics.

U.S. retail diesel prices last week rose to their highest level in almost three months after climbing 6.7 cents to $3.892 a gallon, the Department of Energy reported.

The national average price of diesel has now jumped 17.1 cents over a three-week span, which followed a period of falling prices, and is 82.5 cents higher than a year ago, DOE said after its Oct. 31 survey of fueling stations.

The diesel average is the highest since Aug. 8, when it was $3.949.

DOE also reported the average price of regular gasoline dropped 1 cent to $3.452 a gallon, the second straight decline and the seventh in eight weeks. Gas is now 64.6 cents higher than a year earlier.

Neil Gamson, economist at DOE’s Energy Information Administration, told Transport Topics the increase in diesel was the result of crude oil prices pushing back over $90, coupled with lower stocks of distillates.

“The U.S. has become the world’s supplier of diesel fuel,” said Kyle Cooper, principal in Houston consultancy IAF Advisors. He noted that the domestic market remains tight as about 900,000 distillate barrels are being exported weekly.

The price gyrations continue to puzzle truck executives.

“Fundamentals don’t seem to be part of the market anymore. Hype seems to drive it,” said Roger Amhof, a vice president of Amhof Trucking Inc., an Eldridge, Iowa, hauler of outsized and flatbed freight.

Amhof is installing aerodynamic trailer tails, fuel-efficient tires and other equipment. To cut back on idling, the carrier is using auxiliary heating units and air conditioning modules, which can cut idling time by up to 50%.

“We can’t recover the costs with a fuel surcharge,” he said.

Another big factor in fuel savings is monitoring empty miles.

“We’re on our dispatchers all the time about this. We want to keep it down below 10%; that’s my threshold,” he said.

He added Amhof’s biggest weapon is negotiating for fuel.

“We’re going to our fuel vendors and saying, ‘We need your best deal,’ ” he said.

The company reached an agreement with a supplier that asked for a guaranteed 50,000 gallons in sales each month for retail minus 5 cents, he said.

“That’s 2 cents better than I was running before,” Amhof said. “I see a 20-cent or 25 cents a gallon difference, especially when you’re in a falling market.”

He explained that when the wholesale price is dropping but the retail price at a truck stop does not, it is because fuel suppliers can’t lower retail prices below what they paid for fuel they haven’t sold yet.

In its bid to save on fuel, National Retail Systems Inc., North Bergen, N.J., a hauler for big box retailers, is testing electronic onboard recorders from a number of manufacturers.

The plan is to use the EOBRs in NRS’ 800 tractors to cut down on idling and improve mileage, said fuel manager Mike Hayes. The company is only in the testing phase but believes results are promising, he said.

Using EOBRS to cut down on idling and improve miles per gallon depends on a fleet, said Ryan Barnett of Xata Corp.

“We have seen many companies start at 5.5 miles to the gallon and end up at 6.5 after a year,” he said. If they are traveling 5 million miles a year, that’s $538,000 of fuel savings in a year at $3.85 a gallon. Barnett said.

Meanwhile, unlike U.S. refineries, many European refineries are not equipped to process the cheaper, heavier and sour crude, which contains high sulfur content, said Denton Cinquegrana, senior markets editor at Oil Price Information Service.

This means refineries in Europe must take sweet, low-sulfur crude, which costs more. The price difference has drawn exports to Europe, which have increased significantly in the past several months and helped tighten domestic supplies, he said.

In the United States, this means there’s more motivation for refineries to make more diesel rather than gasoline because diesel commands a higher price at the moment, Cinquegrana added.

On Nov. 3, crude for December delivery rose as much as 91 cents, or 1%, to $93.42 a barrel in New York, mostly on fears of Greece defaulting on its debt.