Diesel Jumps to $3.819 a Gallon
Average Tops $4 in Some States as Crude Soars
By Frederick Kiel, Staff Reporter
This story appears in the March 17 print edition of Transport Topics.
The U.S. average retail diesel price broke its record high for the third straight week, surging to $3.819 a gallon and topping $4 a gallon in some places, pushed by soaring crude oil prices that also set all-time highs and closed above $110 a barrel for the first time in history.
The average price of diesel jumped 16.1 cents last week, the Energy Department said March 10, marking the biggest single-week increase since the record 34.6-cent jump in October 2005 following hurricanes Katrina and Rita.
Gasoline also hit its highest average ever, rising 6.3 cents a gallon to $3.225 a gallon, passing the $3.218 record set May 21.
Diesel prices have risen 53.9 cents a gallon in the past month, and climbed above $4 a gallon in four states, averaging $4.096 a gallon in New York, $4.051 in Pennsylvania, $4.044 in California and $4.02 in Connecticut, the Oil Price Information Service said.
Explaining those high points, Doug MacIntyre, an analyst at the DOE’s Energy Information Administration, said, “Colder weather than normal in the Northeast drove up heating oil demand, which is bound to diesel, which sent diesel prices higher in the three states in the region.”
“California is a separate market,” MacIntyre said. “They have a tighter diesel supply, especially because strong diesel demand in East Asia is affecting prices as far away as California.”
Crude oil on the New York Mercantile Exchange closed at $110.33 a barrel on March 13, its highest price ever, but it traded at $111 a barrel earlier in the day, Bloomberg News Service reported.
John Felmy, chief economist of the American Petroleum Institute, Washington, D.C., told Transport Topics the influences of crude oil and a tight diesel market on retail prices become clear when the rise in crude prices is expressed in gallons rather than barrels.
“The average price of crude oil between Jan. 1 and today [March 12] is 91 cents a gallon higher than its average price for the same period in 2007,” Felmy said. Diesel last week was $1.134 a gallon more expensive than this time last year, and gasoline was 66.6 cents higher.
Felmy noted the large gap between diesel and gasoline prices and said, “U.S. gasoline demand was down a half-percent in 2007, but diesel demand rose over 8%.”
Although U.S. refineries are producing record amounts of gasoline and diesel, Felmy said that “gasoline imports are also at a record high, but diesel imports have dropped considerably because of surging demand overseas.”
Other analysts agreed that the diesel demand is growing faster than for gasoline.
“Gasoline has been a bit of a laggard because it has been in a bear market in the futures market, while diesel futures continue to go up,” Mary Welge, senior editor at the Oil Price Information Service, told TT. “Distillate stocks are lagging, while we have stronger demand, both here and overseas. Also, the transfer to ultra-low-sulfur diesel is still pushing the price up.”
Laurie Falter, an analyst at DOE’s Energy Information Administration, agreed.
“We have seen another drop in distillate stocks, which fell another 2.4 million barrels last week, putting them 5.6 million barrels below what we had last year [and] adding even more tightness than usual to the market,” Falter told TT.
Meanwhile, trucking companies, especially small carriers, were increasingly hurt by soaring fuel prices.
“The larger trucking companies have been successful in passing on costs, but smaller guys haven’t, and they have been suffering dramatically,” Felmy said.
David Owen, president of the National Association of Small Trucking Companies, said, “Yes, members are going out of business . . . laying off drivers and . . . just parking their trucks because they can’t get paid enough to run them, all because of the price of diesel.
“Truckers are extremely frustrated,” Owen said. “We’re getting a much larger volume of calls from ticked-off members, but they don’t know who they should be angry at, the government, oil traders or shippers.”
Owen said that he saw no awareness in the government or the nonprofessional driving public that a typical heavy-duty truck gets 5 miles per gallon, which means a company would have to spend nearly $800 on fuel alone to send freight 1,000 miles, compared with $537 last March and $299.20 in March of 2000.
“I would put the diesel price rise as one of the most inflationary processes that I have ever seen in my lifetime,” Owen said. “You, me, every Republican and every Democrat, are going to be paying much higher prices for eggs, bread, clothes and everything else.”
This story appears in the March 17 print edition of Transport Topics.
The U.S. average retail diesel price broke its record high for the third straight week, surging to $3.819 a gallon and topping $4 a gallon in some places, pushed by soaring crude oil prices that also set all-time highs and closed above $110 a barrel for the first time in history.
The average price of diesel jumped 16.1 cents last week, the Energy Department said March 10, marking the biggest single-week increase since the record 34.6-cent jump in October 2005 following hurricanes Katrina and Rita.
Gasoline also hit its highest average ever, rising 6.3 cents a gallon to $3.225 a gallon, passing the $3.218 record set May 21.
Diesel prices have risen 53.9 cents a gallon in the past month, and climbed above $4 a gallon in four states, averaging $4.096 a gallon in New York, $4.051 in Pennsylvania, $4.044 in California and $4.02 in Connecticut, the Oil Price Information Service said.
Explaining those high points, Doug MacIntyre, an analyst at the DOE’s Energy Information Administration, said, “Colder weather than normal in the Northeast drove up heating oil demand, which is bound to diesel, which sent diesel prices higher in the three states in the region.”
“California is a separate market,” MacIntyre said. “They have a tighter diesel supply, especially because strong diesel demand in East Asia is affecting prices as far away as California.”
Crude oil on the New York Mercantile Exchange closed at $110.33 a barrel on March 13, its highest price ever, but it traded at $111 a barrel earlier in the day, Bloomberg News Service reported.
John Felmy, chief economist of the American Petroleum Institute, Washington, D.C., told Transport Topics the influences of crude oil and a tight diesel market on retail prices become clear when the rise in crude prices is expressed in gallons rather than barrels.
“The average price of crude oil between Jan. 1 and today [March 12] is 91 cents a gallon higher than its average price for the same period in 2007,” Felmy said. Diesel last week was $1.134 a gallon more expensive than this time last year, and gasoline was 66.6 cents higher.
Felmy noted the large gap between diesel and gasoline prices and said, “U.S. gasoline demand was down a half-percent in 2007, but diesel demand rose over 8%.”
Although U.S. refineries are producing record amounts of gasoline and diesel, Felmy said that “gasoline imports are also at a record high, but diesel imports have dropped considerably because of surging demand overseas.”
Other analysts agreed that the diesel demand is growing faster than for gasoline.
“Gasoline has been a bit of a laggard because it has been in a bear market in the futures market, while diesel futures continue to go up,” Mary Welge, senior editor at the Oil Price Information Service, told TT. “Distillate stocks are lagging, while we have stronger demand, both here and overseas. Also, the transfer to ultra-low-sulfur diesel is still pushing the price up.”
Laurie Falter, an analyst at DOE’s Energy Information Administration, agreed.
“We have seen another drop in distillate stocks, which fell another 2.4 million barrels last week, putting them 5.6 million barrels below what we had last year [and] adding even more tightness than usual to the market,” Falter told TT.
Meanwhile, trucking companies, especially small carriers, were increasingly hurt by soaring fuel prices.
“The larger trucking companies have been successful in passing on costs, but smaller guys haven’t, and they have been suffering dramatically,” Felmy said.
David Owen, president of the National Association of Small Trucking Companies, said, “Yes, members are going out of business . . . laying off drivers and . . . just parking their trucks because they can’t get paid enough to run them, all because of the price of diesel.
“Truckers are extremely frustrated,” Owen said. “We’re getting a much larger volume of calls from ticked-off members, but they don’t know who they should be angry at, the government, oil traders or shippers.”
Owen said that he saw no awareness in the government or the nonprofessional driving public that a typical heavy-duty truck gets 5 miles per gallon, which means a company would have to spend nearly $800 on fuel alone to send freight 1,000 miles, compared with $537 last March and $299.20 in March of 2000.
“I would put the diesel price rise as one of the most inflationary processes that I have ever seen in my lifetime,” Owen said. “You, me, every Republican and every Democrat, are going to be paying much higher prices for eggs, bread, clothes and everything else.”
