By Frederick Kiel, Staff Reporter This story appears in the Feb. 14 print edition of Transport Topics.
Continuing cold weather across much of the United States and Europe and political unrest in Egypt helped push domestic fuel prices higher. The average retail cost of a gallon of diesel rose 7.5 cents to $3.513 a gallon last week.
The 10th straight weekly increase in diesel prices sent the fuel to a level 74.4 cents higher than it was during the comparable week last year, according to the Department of Energy.
In addition to the bone-chilling cold, fuel prices are rising because of “the political unrest in Egypt, where a lot of crude oil flows through the Suez Canal,” said Brad Simons, president of Pathway Network, a subsidiary of Simons Petroleum, Oklahoma City.
The average price of regular gasoline increased 3.1 cents a gallon to $3.132, its ninth increase in the past 10 weeks, DOE reported Feb 7, after its weekly survey of fueling stations. Gasoline is now 48 cents more expensive that the comparable week last year, DOE said.
Over the past 10 weeks, diesel has climbed 35.1 cents a gallon, and gasoline has risen 27.6 cents.
The U.S. trucking industry burns 752 million gallons of diesel weekly and 280 gallons of gasoline, American Trucking Associations estimated. At those rates, fleets and trucking paid $559.5 million more for diesel and $134.4 million for gasoline than the comparable week of 2010.
As the political crisis in Egypt unfolded, crude oil shot up to $92.19 a barrel on the New York Mercantile Exchange Jan. 31, Bloomberg News reported. However, it has trickled down in early February, closing at $86.73 on Feb. 10.
One trucking executive said a new trend among some shipping customers was compounding troubles from the rise in diesel.
“What is new during this fuel run-up is that some of our largest customers have been increasingly going from a 5-1 ratio in fuel surcharges to 7-1,” Lisa Petersen, director of logistics and intermodal at Market Transport Ltd., Portland, Ore., told TT.
She explained that it means shippers, instead of giving Market Transport 1 cent for every 5-cent increase in diesel, were now offering only 1 cent for every 7-cent jump.
“Stretching it out to 7-1 is really taking a toll on us, and these are Fortune 500 companies that are doing it,” Petersen said. “We’re losing 2 cents a mile, and to get it back, we have to build it into our rates, but that forces us to look forward to all of 2011 and try and estimate where prices will be for contracts that we want to bid on.”
She said that, on one of the company’s typical regional runs of 960 miles, “the highest fuel surcharge would return us about $460, while the average national account FSC would return $385 . . . [but] one large customer recently reduced their fuel surcharge that would pay us just $260.”
Neil Gamson, an economist at DOE’s Energy Information Administration, said the United States and Europe are reaching their peak use of distillates.
He said distillate supply in the United States, which had been at higher than average levels before winter arrived, has been drawn down as cold weather caused millions of people to turn up their oil heat.
EIA said in its latest short-term outlook that diesel will average $3.43 a gallon for all of 2011, or 8.3 cents lower than the current average price. The agency also predicted diesel will average $3.51 for 2012 as global diesel demand increases.
