Diesel Jumps 2.6¢ to $3.977

This story appears in the Feb. 17 print edition of Transport Topics.

The U.S. diesel average rose 2.6 cents last week to $3.977 a gallon, the third straight increase that has pushed prices up more than a dime, the Department of Energy reported.

The latest increase in commercial trucking’s main fuel followed the continued cold winter weather that has eaten into Northeast fuel supplies and pushed crude oil above $100 a barrel for the first time since Dec. 27.

Diesel’s 10.4-cent spike over the past three weeks marked the first time in a year it that has risen that fast.

The current price is 12.7 cents below year-ago levels. Last February, diesel rose as high as $4.159, which was the highest level in about 4½ years.

“You’re dealing with consumers in the Northeast really driving up demand for ultra-low-sulfur diesel,” said Sean Hill, an analyst with DOE’s Energy Information Administration. “Distillate stocks are considerably lower than last year, and that is pushing prices through the roof.”

Diesel has skyrocketed in the Northeast since Jan. 13, jumping 26.2 cents in New England and 31.8 cents in the Central Atlantic. The increases last week were 6.4 cents to $4.369 in New England and 8.2 cents in the Central Atlantic to $4.363.

Distillate inventories, which include diesel and heating oil, plunged by 7 million barrels in the Northeast during January — almost triple the five-year average draw of 2.6 million barrels this time of year, Hill said.

EIA reported Feb. 12 that distillate inventories fell 730,000 barrels in the first week in February. East Coast supplies declined 83,000 barrels, led by a 58,000-barrel drop in the central Atlantic, where supplies are down 41.3% this year.

The national gasoline average rose 1.7 cents to $3.309 a gallon, the first upturn following four declines, led largely by higher oil prices, said Hill.

Gas, which had slipped 4 cents in January, is 30.2 cents below the corresponding week last year.

Also last week, crude oil on the New York Mercantile Exchange rose as high as $100.37 a barrel on Feb. 12, the highest closing price since Oct. 18.

Analysts pegged the oil increase to the distillate decline, lower inventories in Cushing, Okla., a major oil delivery point, and to another winter storm that swept through the eastern portion of the United States last week, Bloomberg News reported.

One New England trucking executive said the diesel-price hikes have prompted the company to boost its fuel surcharge to 34% from 32%.

“I’m hearing [diesel prices] may not stop until it hits $5 a gallon,” said Joe DiGiulio, director of logistics for Ideal Transportation Co. in Peabody, Mass.

Ideal’s 30-truck fleet specializes in moving intermodal freight from northern ports.

“Some of these steamship lines don’t want to pay us the full fuel surcharge, but they’re going to have to,” DiGiulio said. “This is going to have an effect on all commerce in the Northeast. When you go to the grocery store, you’re going to see higher prices for every commodity — it has a bearing on every consumer.”

DiGiulio said his trucks have GPS-based speed governors that send him a message if they go more than 60 mph.

“I don’t want my trucks speeding,” he said. “I want to be sure every truck is safe, and I want to save on fuel costs.”

Though DiGiulio expressed concern about $5 a gallon diesel, EIA last week downplayed that likelihood.

Though it raised its outlook for 2014 U.S. retail diesel prices by 2 cents, the second straight month it has boosted the forecast, its projection for the entire year is $3.83, well below current levels.

EIA also said gasoline will drop to $3.44 this year, down from last year’s $3.51.

Hill said the outlook takes a longer look at prices than DOE’s more immediate weekly reports. Recent spikes notwithstanding, both crude and retail fuel prices should moderate when the winter weather breaks, he told TT.

“Unfortunately, in the outlook, we don’t have regional prices,” he said. “We’re dealing with the national average, [and] the Northeast gains were fairly substantial in the past few weeks.

“It’s more drastic this year because it’s been colder,” he added. “Over the longer term, more crude oil supply will continue to lower prices later this year and into 2015.”