Diesel, Gas Prices Rise Again

By Frederick Kiel, Staff Reporter

This story appears in the Aug. 10 print edition of Transport Topics.

U.S. retail fuel prices continued to rise last week, as the average cost of a gallon of diesel climbed 2.2 cents to $2.55 a gallon, while gasoline jumped 5.4 cents to $2.557, the second straight week of increases, the Department of Energy reported.

It was the second straight rise, after both fuels had fallen four weeks in a row. Diesel has gone up 5.4 cents over the past two weeks, while gasoline has risen 9.4 cents, DOE reported Aug. 3 after its survey of fueling stations.

“The reason that gasoline nearly doubled diesel’s rise was because gasoline demand seems to be getting stronger,” John Felmy, chief economist of the American Petroleum Institute, told Transport Topics.

Despite the recent increases, diesel was selling for $1.952 less per gallon than the comparable week in 2008, while gasoline was selling for $1.323 less.

Felmy and Douglas MacIntyre, analyst at DOE’s Energy Information Administration, attributed the rises to a climb in crude that began in mid-July.

“The retail price in both fuels is due to the rising of crude oil prices, which generally takes a few weeks to be reflected in retail,” MacIntyre told TT. “If crude oil prices remain this high over the next couple of weeks, we can see retail prices of both diesel and gasoline continue to go up.”

Crude has risen from its recent low $59.52 a barrel on July 14 to settle at $71.94 on Aug. 6 on the New York Mercantile Exchange.

One trucking company that instituted a fuel optimization program last summer as diesel prices were setting records is now tying the plan to driver’s compensation to achieve better results.

“The fuel optimization program would give a driver the most economical places to buy diesel at any route . . .” Todd Gatlin, fuel manager of Empire Express Inc., Memphis, Tenn., told TT. “Sometimes, if they got low in fuel in a small town, with only one station selling diesel at a high price, the program would tell them to buy only 50 gallons there and drive down the road 300 miles, where there might be a larger place with competing truck stops that will drive down prices,” Gatlin said.

However, only 35% of drivers followed the plan, he said. So, Empire instituted a program this year in which following the fuel plan counted 20% of a formula that helped determine a driver’s compensation for the second half of the year.

“About 70% are now following the fuel program, and I believe more than 90% will be following it by September,” Gatlin said.

Two other fleets said fuel surcharges were getting them through the swings in diesel prices.

“We do have a fuel surcharge that fluctuates every week, and that does a pretty good job,” James Konig, vice president of operations for flatbed carrier JBT Services Inc., Oshkosh, Wis., told TT.

“However, about 20% of our customers have their own fuel surcharges, and they charge it much less frequently,” he added. “Sometimes, that’s to our advantage, but most of the time, it’s not to our advantage, but they refuse to change it.”

JBT, with 30 tractors and 35 trailers, carries mostly steel, primarily in the Midwest.

“We have 100% of our contracts with fuel surcharges, and we change them, some every week, the rest every two weeks,” Dave Schroyer, president of regional carrier Schroyer Inc., Antwerp, Ohio, told TT. The company runs 12 tractors, hauling feed and fertilizer, the majority within 300 miles of its base.

“We haven’t any particular trouble with the wide price swings in diesel or in the way prices went this year,” he said.

Late last week, DOE reported that overall fuel demand climbed 3.1% last week to 19.3 million barrels a day in the latest week.

As a result, supplies of distillate fuel, which includes diesel and heating oil, fell 1.14 million barrels to 161.5 million barrels.