Diesel, Gasoline Prices Rise for Eighth Straight Week

This story appears in the Jan. 31 print edition of Transport Topics.

U.S. retail fuel prices rose for the eighth consecutive week as frigid temperatures on the East Coast and in Europe boosted demand,  analysts said.

The Department of Energy reported that the average price of a gallon of retail diesel rose another 2.3 cents last week to $3.43, while the gasoline average trickled up 0.6 cent to $3.11 in the department’s Jan. 24 survey of filling stations.

“It’s been the cold weather both here on the East Coast and in Europe that was behind the latest rise in retail fuel prices, especially diesel, which comes from the same part of crude as heating oil,” Phil Flynn, senior analyst at futures trading firm PFGBest, Chicago, told Transport Topics. “Demand for heating oil has really been on fire, even though the distillates supply has been at higher than average levels.” Flynn said that Europe and the United States have a long history of trading refined oil products, so that price changes in retail diesel and gasoline in one area influence prices in the other region.

Diesel is now at its highest price since Oct. 20, 2008, while gasoline is at its highest average since Oct. 13, 2008, DOE said.

Diesel is also 59.7 cents a gallon more expensive than the comparable week of 2010, while gasoline is 40.5 cents higher per gallon, according to the agency.

American Trucking Associations estimates that the U.S. trucking industry burns 752 million gallons of diesel weekly and 285 million gallons of gasoline.

Thus, U.S. truckers paid $201.5 million more for diesel last week than they did the week of Dec. 6 and $72.4 million more for gasoline.

“We’re in the meat of the heating oil season right now, and it’s been bitter cold, so that diesel prices are still rising, even though crude has seen a significant drop,” said Neil Gamson, economist for DOE’s Energy Information Administration.

Crude oil, which had been trading in a narrow range of $88 a barrel to the low $90s for nearly a month, dropped sharply in a five-day period to close at $86.19 a barrel Jan. 25 on the New York Mercantile Exchange, down from $90.86 on Jan. 19, Bloomberg News reported. Gamson said the drop was too late to influence DOE’s prices on Jan. 24, as it usually takes a week or more for crude price swings to show up in retail costs.

“Retail gasoline prices may come down with crude’s fall, but continued cold weather could prevent or mitigate a similar fall for diesel prices,” Gamson said.

Futures analyst Flynn said some of his clients were buying more fuel for risk-management programs for trucking firms, who he said were seeking to take advantage of the dip in crude prices to lock in lower costs.

“Our members see the continued high diesel prices as a real sore point,” Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, Grain Valley, Mo., told TT. “They see the news that per-barrel crude oil prices have been falling for a nearly a week, but they’re not seeing that decrease in diesel fuel, and they figure they’re being taken advantage of.”

OOIDA says it represents 150,000 drivers in the United States and Canada who collectively own and/or operate more than 230,000 individual heavy-duty trucks and small truck fleets.

“This recent price surge in diesel has had an uneven effect on our members,” Spencer added.

“Surcharges are the still the norm in offsetting increased fuel costs, but in some instances, where members deal with brokers, it’s a fight to get increased revenue,” he said.

Spencer explained that brokers “in many cases” will tell owner-operators that the client did not offer a fuel surcharge, “but that’s not the case with most shippers, who have become accustomed to fuel surcharges and even like them.” Spencer added that whether an OOIDA member was a good business person gave the best indication of how he would handle rapidly rising fuel prices.

“Those drivers that have their finances under control, they are just much better at insisting on a decent freight rate that takes into account current fuel costs,” Spencer said. “Those drivers who are more desperate to generate cash are much more vulnerable when fuel spikes.”