Diesel Increases 2¢ to $2.919

This story appears in the Aug. 2 print edition of Transport Topics.

The U.S. retail diesel average price reversed course last week, rising 2 cents a gallon to $2.919 after dropping 6.2 cents over the previous four weeks, the Department of Energy reported.

The gasoline average, meanwhile, rose 2.7 cents to $2.749 a gallon, the second straight increase after three weeks of declines, DOE reported after its July 26 survey of fueling stations.

Since reaching its high for the year of $3.127 on May 10, diesel has declined 20.8 cents per gallon. Over the same period, the gasoline average has declined 15.6 cents per gallon.

Diesel is now 39.1 cents higher than it was a year ago, while gasoline is 24.6 cents above the corresponding week in 2009.

On July 29, crude oil closed at $78.25 a barrel on the New York Mercantile Exchange, Bloomberg News reported, up from its low for the year on May 20 of $68.01 a barrel.

“Retail [fuel] has been kind of wandering,” said Tom Kloza, chief oil analyst at Oil Price Information Service. “You might see it go up a nickel one week and down a nickel the next, but not a lot of overall movement.”

“It’s like world soccer,” Kloza said. “There’s a lot of back and forth, a lot of running around and cheering, and maybe even a little mayhem. But not an awful lot of price movement.”

Jason Guss, operations manager for Red Rock Transfer, a small West Valley City, Utah, heavy-equipment hauler, said his company employs a low-tech fuel-saving strategy.

“We just get a bunch of old guys to drive our trucks because they’re the ones that keep their foot out of the pump,” Guss said. “If you have old guys driving, they’re not burning up all your fuel and they’re not tearing up your trucks. The only time the truck smokes is when they start it.”

No need for driver training when you have experience behind the wheel, he said.

Red Rock’s youngest driver is 57 years old and the carrier’s oldest driver is 70, Guss said. “They’ve got all the patience in the world, and 50 miles an hour is all they need to do.”

The older drivers sometimes get 7.4 mpg, which is excellent fuel efficiency for trucks that commonly get a low as 4 miles a gallon when hauling heavy equipment, he said.

“These guys are truck drivers. Everyone today that you see going up and down the road, those are all steering-wheel holders,” Guss said.

Jeff Wood, director of procurement for Pritchett Trucking Inc., Lake Butler, Fla., said his company buys diesel in bulk, and routes its drivers to take advantage of discounts set up with major truck stops.

“All of our trucks are equipped with GPS, so we’re constantly monitoring the mpg of every tractor looking for trucks that may be dipping for some reason or another and for mechanical issues,” Wood said. “You live and die by fuel.”

Wood said the truckload carrier also is trying to reduce weight as much as possible, equipping some trucks with super single tires and putting aerodynamic devices of some of the carrier’s fleet of 200 tractors and trailers.

Meanwhile, OPIS’ Kloza said he doesn’t expect any wild price swings at the pump during August, but he is concerned about September, which will be a “pivotal month.”

“After Labor Day there are a lot of worries and there are going to be a lot of measurements of the economy,” Kloza said. “How those measurements go and what happens in the financial markets is going to determine what happens with oil. It’s a head or tails flip there.”

Phil Flynn, chief energy analyst at brokerage firm PFGBest, said he believed prices for both diesel and gasoline could decline in the short term.

“My gut feeling is that they’re not going to stay here very long,” Flynn said. “There are not a lot of reasons for prices to stay high right now.”

One positive price indicator is that diesel inventories are 20% to 25% above the five-year average, Flynn said.

“Right now we’re in this kind of earnings-related bubble that things are good,” Flynn said. “But I think these earnings are underlying the fact that there are still some problems down on the ground — that there’s still some weakness in the economy. Strong earnings are not enough to overcome the glut of supply in the short term.”