Diesel Hits Two-Year High
This story appears in the Nov. 22 print edition of Transport Topics.
The average cost of a gallon of diesel in the United States jumped to a two-year high last week after prices climbed 6.8 cents to $3.184 in the Department of Energy’s survey of retail filling stations.
The weekly increase was the largest since April 5, DOE’s Energy Information Administration reported, and left the average 39.4 cents higher than a year ago and at its highest point since Oct. 27, 2008.
DOE also reported that the gasoline price average rose 2.7 cents a gallon to $2.892. Gasoline is just 0.6 cent from its 2010 peak of $2.898 set in early May, and 26.3 cents higher than it was at the corresponding week of last year.
The increases came even as crude oil prices dipped, settling at $81.85 on Nov. 18 on the New York Mercantile Exchange.
Neil Gamson, an analyst with EIA, said diesel prices rose because it is “essentially following crude and it’s the heating season, so supplies will be tightening.”
Gamson told Transport Topics that changes in diesel prices lag behind fluctuations in the crude oil market, so the price this week was reflective of the two-year high that crude hit the previous week.
“So you have higher crude prices,” he said, “and even though in the last couple days it’s gone down . . . it will be at least a week or so before we see that show up at the pump.”
Fleet executives said they were seeing rising prices and increases in demand for fuel.
Joel Amos, fuel manager for Wiley Sanders Truck Lines Inc., Troy, Ala., said rising prices are less of a concern for the 550-truck fleet than recruiting and retaining drivers.
“Prices always affect us . . . but price increases have been neutralized” through fuel surcharges, he told TT. “We’re in a position now where we’re thinking about other things, like trying to keep drivers on our trucks.”
Dennis Schlegel, president of Cargo Express Inc., Boise, Idaho, said increased business and predictions of an economic recovery have the fleet preparing for higher prices.
“I think fuel’s going to go up, and quite frankly, I’m trying to hoard cash because, even though we get fuel surcharges, they always lag,” he said. “We’re paying cash on Friday for fuel that we won’t collect revenue on for 30 to 45 days, so as fuel goes up, it is a bad curve for us.”
Schlegel also said that to control fuel costs, he limits where drivers in his 125-truck fleet can fill their trucks.
“We actually restrict the number of gallons our trucks can put on out here [in Idaho],” he said. “We just restrict the trucks to 75 gallons and, hopefully, that will get them down to Utah, and then we restrict them there and we try to get them to over Colorado or Wyoming,” where prices are generally lower.
Prices, Schlegel said, tend to fall as his trucks travel east, down the Rockies toward the Midwest but are higher in Idaho and west.
DOE’s Short-Term Energy Outlook predicted that crude prices would reach about $83 a barrel during the winter, then gradually rise to $87 a barrel by the fourth quarter of 2011.
Crude oil prices declined as supplies of oil, as well as motor fuels, fell.
DOE reported that crude stockpiles fell 7.29 million barrels to 357.6 million last week; supplies of distillate fuels, including ultra-low-sulfur diesel, dipped 0.7% to about 158.8 million barrels last week, and stockpiles of gasoline dropped 1.3% to about 207.7 million barrels.
Andre Julian, chief financial officer at OpVest Wealth Management in Irvine, Calif., said that big declines in stockpiles would normally push crude oil prices higher, but investor fears about the economies in Ireland and China are “trumping inventories at the moment.”
Regardless, those declines are a “sign that the economy is improving,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Fla. “As it improves, you will see greater demand for oil and gasoline, putting downward pressure on stockpiles.”
Bloomberg News contributed to this report.
