Diesel, Gas Set Records
Jumps Due to Soaring Oil Costs, Analysts Say
By Frederick Kiel, Staff Reporter
This story appears in the April 28 print edition of Transport Topics.
U.S. retail fuel prices continued to soar into uncharted territory last week, as the average price of diesel jumped another 8.4 cents to $4.143 a gallon and gasoline gained 11.9 cents to $3.508, the Department of Energy reported.
While the fuels hit new records, crude oil also hit a new high of just under $120 a barrel on April 22, before a small decline later in the week.
“It’s all about the runaway train that is also known as the crude oil market,” Tom Kloza, chief analyst at the Oil Price Information Service, told Transport Topics when asked for an explanation.
Kloza said global traders were buying diesel at a premium because they believe “diesel is the great growth product of this century, and developing countries need diesel to drive their economies.”
“Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe and the U.S., putting more pressure on the tight global refining capacity,” DOE’s Energy Information Administration said.
Diesel’s latest increase left the average price $1.292 higher than a year earlier, DOE said after its April 21 survey of fueling stations.
Diesel is also 88.4 cents more expensive than at the end of January, which means a trucker last week had to pay an additional $176.80 to buy 200 gallons of diesel than he would have paid early in 2008.
Diesel rose in every DOE section of the country, hitting a high of $4.37 a gallon in the Central Atlantic subregion of the East Coast.
DOE also said gasoline was 63.9 cents higher than the corresponding week a year earlier, with the highest average price of $3.846 reported in California. Gas has gained 24.9 cents in the past month alone, DOE said.
Trucking burns an estimated 730 million gallons of diesel and 280 million gallons of gasoline each week.
Despite the rising prices, Steve Helton, transportation manager for Columbia-Pacific Transport Co., Kennewick, Wash., said his company’s headaches over collecting fuel surcharges dissipated when he decided to include them in the shipping price.
“I decided to include the weekly change in fuel prices as part of a lump-sum contract offer,” Helton told TT. “Clients have no idea what part of the bill includes fuel, and they can either accept the contract or not.”
The company has only a dozen tractors but coordinates nationwide shipments of 20 other companies that carry its freight.
Helton said he told managers of the 20 other companies “that I don’t want to see any fuel surcharges on bills you send. Include the fuel in a flat fee.”
Several publicly traded trucking companies reported deep cuts in quarterly profits last week, with rising fuel prices cited as a major reason for the decline.
Truckload carrier Covenant Transportation Group, Chattanooga, Tenn., reported a loss of $7.8 million, nearly four times as much as the $2.1 million loss a year earlier.
The company said the fuel expense increased about $17.5 million during the quarter, with surcharges covering only about $10.2 million, or 58% of the increase. Thus, the net cost of fuel rose by about $7.2 million, or about 7.5 cents per mile, the company said.
Similarly, less-than-truckload carrier Old Dominion Freight Line attributed much of its decline in first-quarter profits, compared with a year earlier, to the price of fuel costs.
“Our operating results were masked . . . by the significant increase in fuel costs for the quarter,” said Chairman Earl Congdon.
Marten Transport and Heartland Express were among the other publicly traded companies that reported drops in profit because of high fuel costs.
“The realization is sinking in that these prices are here to stay and no one can do anything about it,” said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association.
“The squeeze is getting plenty tight for some of our members, both those with big truck payments and even for those some with no payments,” Spencer told TT.
“If the numbers don’t get better soon, a lot of them will be looking to do something else,” Spencer said. “In fact, it’s already happening today.”
Meanwhile, crude oil prices dipped to about $117 a barrel late last week on the New York Mercantile Exchange after DOE reported U.S. stockpiles increased. Moreover, the dollar rose against the euro, reducing the appeal of commodities to investors, Bloomberg News reported.
But with oil remaining at historic levels, several Democratic senators are threatening to hold up valuable arms deals with Middle Eastern countries if OPEC members don’t increase oil production to help ease the cost of fuel, news services reported.
Sens. Charles Schumer of New York, Byron Dorgan of North Dakota, Bob Casey of Pennsylvania, as well as Bernie Sanders of Vermont said that if production does not increase, the nations “risk Congress’ holding up multimillion-dollar arms deals with Saudi Arabia, the United Arab Emirates and other OPEC members.”
This story appears in the April 28 print edition of Transport Topics.
U.S. retail fuel prices continued to soar into uncharted territory last week, as the average price of diesel jumped another 8.4 cents to $4.143 a gallon and gasoline gained 11.9 cents to $3.508, the Department of Energy reported.
While the fuels hit new records, crude oil also hit a new high of just under $120 a barrel on April 22, before a small decline later in the week.
“It’s all about the runaway train that is also known as the crude oil market,” Tom Kloza, chief analyst at the Oil Price Information Service, told Transport Topics when asked for an explanation.
Kloza said global traders were buying diesel at a premium because they believe “diesel is the great growth product of this century, and developing countries need diesel to drive their economies.”
“Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe and the U.S., putting more pressure on the tight global refining capacity,” DOE’s Energy Information Administration said.
Diesel’s latest increase left the average price $1.292 higher than a year earlier, DOE said after its April 21 survey of fueling stations.
Diesel is also 88.4 cents more expensive than at the end of January, which means a trucker last week had to pay an additional $176.80 to buy 200 gallons of diesel than he would have paid early in 2008.
Diesel rose in every DOE section of the country, hitting a high of $4.37 a gallon in the Central Atlantic subregion of the East Coast.
DOE also said gasoline was 63.9 cents higher than the corresponding week a year earlier, with the highest average price of $3.846 reported in California. Gas has gained 24.9 cents in the past month alone, DOE said.
Trucking burns an estimated 730 million gallons of diesel and 280 million gallons of gasoline each week.
Despite the rising prices, Steve Helton, transportation manager for Columbia-Pacific Transport Co., Kennewick, Wash., said his company’s headaches over collecting fuel surcharges dissipated when he decided to include them in the shipping price.
“I decided to include the weekly change in fuel prices as part of a lump-sum contract offer,” Helton told TT. “Clients have no idea what part of the bill includes fuel, and they can either accept the contract or not.”
The company has only a dozen tractors but coordinates nationwide shipments of 20 other companies that carry its freight.
Helton said he told managers of the 20 other companies “that I don’t want to see any fuel surcharges on bills you send. Include the fuel in a flat fee.”
Several publicly traded trucking companies reported deep cuts in quarterly profits last week, with rising fuel prices cited as a major reason for the decline.
Truckload carrier Covenant Transportation Group, Chattanooga, Tenn., reported a loss of $7.8 million, nearly four times as much as the $2.1 million loss a year earlier.
The company said the fuel expense increased about $17.5 million during the quarter, with surcharges covering only about $10.2 million, or 58% of the increase. Thus, the net cost of fuel rose by about $7.2 million, or about 7.5 cents per mile, the company said.
Similarly, less-than-truckload carrier Old Dominion Freight Line attributed much of its decline in first-quarter profits, compared with a year earlier, to the price of fuel costs.
“Our operating results were masked . . . by the significant increase in fuel costs for the quarter,” said Chairman Earl Congdon.
Marten Transport and Heartland Express were among the other publicly traded companies that reported drops in profit because of high fuel costs.
“The realization is sinking in that these prices are here to stay and no one can do anything about it,” said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association.
“The squeeze is getting plenty tight for some of our members, both those with big truck payments and even for those some with no payments,” Spencer told TT.
“If the numbers don’t get better soon, a lot of them will be looking to do something else,” Spencer said. “In fact, it’s already happening today.”
Meanwhile, crude oil prices dipped to about $117 a barrel late last week on the New York Mercantile Exchange after DOE reported U.S. stockpiles increased. Moreover, the dollar rose against the euro, reducing the appeal of commodities to investors, Bloomberg News reported.
But with oil remaining at historic levels, several Democratic senators are threatening to hold up valuable arms deals with Middle Eastern countries if OPEC members don’t increase oil production to help ease the cost of fuel, news services reported.
Sens. Charles Schumer of New York, Byron Dorgan of North Dakota, Bob Casey of Pennsylvania, as well as Bernie Sanders of Vermont said that if production does not increase, the nations “risk Congress’ holding up multimillion-dollar arms deals with Saudi Arabia, the United Arab Emirates and other OPEC members.”
