Diesel, Gas Prices Dip Again; Refinery Woes Hurt West Coast

This story appears in the Oct. 8 print edition of Transport Topics.

U.S. diesel and gasoline prices both declined for the second straight week, the Department of Energy said Oct. 1, as the fuels continued to back away from 11-week surges that drove up prices sharply.

While the national averages declined, according to DOE’s Energy Information Administration survey, reports from the West Coast said fuel prices there were uncommonly high due to refinery problems.

U.S. retail diesel dipped 0.7 cent a gallon to $4.079 on average, EIA said, making the two-week decline total 5.6 cents a gallon from the recent peak of $4.135 on Sept. 17. A year ago, diesel cost $3.749 on average.

“Prices on the West Coast have been particularly high. We’ve seen $4.50 a gallon out here at the peak because of refinery outages on the West Coast,” said Steve Holtgeerts, president of Hogland Transfer Co., Everett, Wash. He added that recently he has paid closer to $4.05 a gallon to fill his 50 trucks.

“California is totally out of whack. It is a regional market that is totally dependent upon local supplies . . . There’s a market squeeze,” said Ben Brockwell, director of data and pricing for the Oil Price Information Service.

Looking at the national average, Brockwell said diesel buyers probably will be able to enjoy a brief respite from rising prices but that the break might not last long. While Brockwell said there probably is room for oil prices to decline, he is not certain that diesel will share fully in the decline.

“There is a typical winter sell-off for oil that seems to be starting a little earlier than normal. Electronic trading programs could accelerate this,” he said, adding that prices for crude could drop even more, but diesel might be the first product to rise.

A strong cold snap or news of economic improvement would be most likely to hit diesel specifically, he said.

U.S. gasoline prices declined 2.2 cents a gallon to $3.804, EIA said. The two-week decline is worth 7.4 cents a gallon.

Gasoline hit a low point of $3.356 on July 2.

U.S. distillate and gasoline stocks moved in different directions, EIA said Oct. 3. The national supply of ultra-low-sulfur distillate declined to 91.1 million barrels on Sept. 28 from 94.8 million the week before. Crude oil stocks also dipped to 364.7 million barrels from 365.2 million.

In contrast, gasoline supplies increased by 114,000 barrels to 195.9 million on Sept. 28. The overall supply of oil is strong, Bloomberg News reported.

“There’s certainly no shortage of crude oil in the U.S.,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, told Bloomberg. “Crude imports at 8.1 million barrels a day are at a low level by historical standards.”

In Washington, Holtgeerts said some of his customers in manufacturing have been predicting softer volumes of freight to be offered.

With fuel often above $4 a gallon, carriers are still scrambling to find ways to save, said Terry Croslow, the new chief financial officer of truckload carrier Venture Express, LaVergne, Tenn.

“The last batch of trailers we bought included aerodynamic skirting. We’re trying to run down deadhead and out-of-route miles as much as possible,” said Croslow, a recent former chairman of the National Accounting & Finance Council of American Trucking Associations.

Croslow said his best hunch is that fuel will go up or hover. “I don’t think it’s going to go down. There’s upward pressure on fuel from refinery capacity issues.”

A series of petroleum infrastructure issues is causing some California gas stations to close, Bloomberg said Oct. 4 . Exxon’s 150,000-barrel-a-day Torrance, Calif., refinery may flare gases for a week as it restores production after a power failure that shut some units and slowed output from others, an Exxon spokeswoman told the wire service.

Chevron’s Kettleman-Los Med-anos pipeline, which carries crude from Kern County to Northern California refineries operated by Royal Dutch Shell, Tesoro Corp. and Valero Energy Corp., shut down when elevated levels of organic chloride were detected in the oil, Bloomberg said. Bloomberg added that Phillips 66 is also scheduled to perform maintenance on process units at its Rodeo and Los Angeles refineries in October, people familiar with the schedules said.

Chevron’s 240,000-barrel-a-day Richmond plant, the largest refinery in Northern California, has been running at reduced capacity since a fire Aug. 6.