Diesel Jumps 10¢ to $3.987, in Largest Increase in 7 Months

U.S. retail diesel prices jumped last week, as the national average gained 10 cents a gallon to $3.987, the largest weekly increase in more than seven months, the Department of Energy reported.

The increase left trucking’s main fuel only 13.7 cents below the two-year high of $4.124, which was set in early May, DOE’s Energy Information Administration said after its Nov. 14 survey of fueling stations.

Diesel has risen 26.6 cents since bottoming out at $3.721 on Oct. 10. The gain last week was the largest increase since a 10.2-cent leap on April 11, leaving the price 80.3 cents a gallon higher than a year ago.

The spike was caused by a combination of high U.S. exports of diesel, high crude oil prices and winter additives that refiners are starting to add to diesel, said Tom Kloza, chief oil analyst with the Oil Price Information Service.

He said the price has jumped at least in part because “we’ve been exporting more diesel than we ever have before,” Kloza told Transport Topics. “Most of it is going to South and Central America,” he said.

DOE also reported that the average price of retail U.S. gasoline rose 1.2 cents to $3.436 a gallon.

Gasoline is now 52.9 cents below its two-year high of $3.965, set on May 9, but is 54.4 cents higher than the year-ago average of $2.892.

According to DOE data, price moves last week represented the largest discrepancy in the diesel gain over gasoline since the aftermath of Hurricane Katrina in October 2005. Overall, it was the largest difference in price changes since May 11, 2009, when gasoline soared 16.2 cents and diesel increased 3.1 cents.

The large spread between price changes is because diesel has far more international demand than gasoline, Kloza said.

“The product that they see the greatest jump in, in terms of demand, is not gasoline; it’s diesel,” he said. Diesel also has a large domestic demand from natural gas and oil exploration operations and the winter additives, factors that gasoline does not have, Kloza said.

Trucking companies in the Midwest have seen a recent shortage of diesel when they buy in bulk, said Tom Balzer, executive vice president of the North Dakota Motor Carriers Association, but there is no shortage at fueling stations.

Fuel supplies in North Dakota frequently are squeezed in the late fall because of agricultural activity, but diesel demand from oil exploration operations is compounding it, Balzer said.

“The activity out in the Bakken [oil formation] is further complicating that,” he said. The shortage should be temporary, as the winter weather stops the harvests, he added.

But American Central Transport Inc. has not experienced effects from the diesel shortage, Tom Kretsinger Jr., president of the Liberty, Mo.-based carrier told TT. “We’ve not run into that,” he said.

Although Kretsinger said he has seen some diesel volatility lately, “the price doesn’t seem to be swinging as severely as the price of oil.”

Crude oil on the New York Mercantile Exchange closed at $75.67 a barrel on Oct. 4, the lowest in a year. It closed at $102.59 on Nov. 16, its first closing price above $100 since June.

Kretsinger said American Central Transport has implemented a number of initiatives to reduce fuel costs, which are the largest cost item for the carrier.

“We’ve done everything that we can possibly think of to improve that,” he said.

Elsewhere, Greg Goodheart, owner of Rajor Trucking, said he was not shocked by the 10-cent diesel increase.

“It’s in the winter time; it didn’t surprise me,” the owner of the Spring Hill, Tenn., carrier told TT.

“Any time fuel goes up, it’s a bad thing,” he said. “As a trucking company, we’re able to pass some of the burden onto the shipper.”

With prices approaching $4 a gallon, “it definitely affects our bottom line,” said Betty Adams, fuel manager with flatbed carrier Boyd Bros. Transportation. “We’re looking for all avenues to save,” she said, mentioning efforts to buy fuel in larger volumes for the carrier’s four terminals.

Adams said Boyd Bros., Clayton, Ala., uses optimization software to find the best prices and runs competitive bidding among major truck stop chains. She also said truck design and spec’ing are important.

“Everything that affects miles per gallon, we look at,” Adams said, adding that engine selections are particularly important.

Given the worldwide demand, diesel prices probably will cross the $4 level very soon, OPIS’ Kloza said.

“I think the rule, rather than the exception, for the next three or four months, is going to be diesel prices north of $4,” he said.

Associate News Editor Jonathan S. Reiskin contributed to this report.