Diesel, Gasoline Prices Rise

This story appears in the June 28 print edition of Transport Topics.

Retail diesel prices reversed course last week, as the national average rose 3.3 cents a gallon to $2.961 after falling 19.9 cents in the five previous weeks, the Department of Energy reported.

The average price of regular gasoline also rose for the first time in six weeks, DOE said June 21, while crude oil traded within a narrow range between $76 and $78 over the eight trading days ended June 24. Oil traders said reports on rising petroleum stockpiles and a slowdown in home sales kept oil prices from rising.

Diesel, commercial trucking’s main fuel, is 13.2% more expensive than a year ago when it cost $2.616 a gallon. For gasoline, the year-over-year increase is 1.9%.

While the May-June price decline in diesel was welcomed, fuel prices still can soar without notice. Therefore, many for-hire and private fleet managers said they must maintain a constant focus on fuel regardless of current prices.

“When fuel moves the way it has been — less than 50 cents over several weeks — then you’ve just got an adjustment in your fuel surcharge,” said Mike Reilly, owner of Westco Express, a Commerce City, Colo., regional truckload carrier.

“Fuel is just volatile, so you need a fuel surcharge so your truck rates can be, too. What I worry about are the spikes — like March to July of ’08 — when it ran up the side of a mountain. That was outside the realm of reason,” Reilly said, referring to the spike toward the record price of $4.764 a gallon.

The managers at Mara Transport, Union, Iowa, track not just the pump price for fuel, but they analyze the after-tax cost, said company Vice President John Good.

“Iowa has a fuel tax of 22.5 cents a gallon and Illinois is 35 cents. So, if the fuel cost is even at the pump, we buy in Illinois because we’ll get a credit on our IFTA reconciliation, and that winds up making Illinois cheaper,” Good explained, referring to the

International Fuel Tax Agreement covering trucks that run through the United States and Canada.

Good said that Mara, a truckload carrier with 32 company and owner-operator tractors, pays a quarterly fuel bonus to drivers who can consume less, and uses fuel optimization software to make recommendations on travel plazas to avoid because they have the highest prices.

Dean Foods, a large national dairy distributor, said June 21 it is using a prototype refrigerated unit from Thermo King Corp. on one of its Class 6 medium-duty vehicles. The reefer unit has no diesel engine of its own, running entirely off an alternator connected to the truck’s power take-off unit.

“Our highest priority is reducing the cost and improving the efficiency of our operations. Innovations that eliminate the use of diesel fuel, which is a major expenditure and our second largest source of emissions, drive cost savings to our business that benefit the environment,” Harrald Kroeker, president of a Dean subsidiary, said in the company statement.

Dean, Dallas, ranks No. 9 on the Transport Topics 100 list of the largest private fleets in the United States and Canada.

Thermo King executive Scott Bates said the new reefer unit should be broadly available before the end of next year and may one day have heavy-duty applications, as well.

Bloomberg News spoke with an oil trader who said the market had gone “bearish.”

“The sale of new homes collapsed by 33%, the most in the history of the data. This is bearish for both the economy and for demand for oil,” Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Fla., told the wire service.

The Commerce Department said June 23 that sales of new homes slipped to an annual pace of 300,000 in May compared with April, the fewest in data going back to 1963.

DOE’s Energy Information Administration said the U.S. inventory of crude oil rose to 365.1 million barrels on June 18 from 363.1 million the week before and 361.4 on June 4.

EIA also reported the U.S. stock of ultra-low-sulfur distillate — the basis of diesel fuel — increased slightly to 97.7 million barrels on June 18 from 97.6 million the week before. At the start of the Memorial Day weekend it had been 94.1 million.

Total distillate usage, which often moves in tandem with economic activity, had been on the rise from 3.61 million barrels a day on Jan. 8, to a high point for this year of 4.09 million on May 14. Since then it has backed off to 3.78 million barrels a day on June 18, an indication the economy may be slowing some.

The U.S. refinery utilization rate increased to 89.4% on June 18 from 87.9% the week before.