Diesel Jumps 7.8¢ to $2.352

This story appears in the June 8 print edition of Transport Topics.

The average price of a gallon of diesel fuel jumped 7.8 cents last week to $2.352 a gallon, the highest level since December, while gasoline rose another 8.9 cents as crude oil pushed near $70 a barrel, the Department of Energy reported.

Diesel has now risen 33.5 cents a gallon since reaching a four-year low of $2.017 on March 16. Gasoline, meanwhile, has surged 81.4 cents since Dec. 22 to reach $2.524 a gallon, the highest since Oct. 27, DOE said after its June 1 survey of fueling stations.

“The reason why both fuels are rising is predominately tied to the increase in crude oil prices, which closed on June 1 at over $68 a barrel,” Douglas MacIntyre, analyst at DOE’s Energy Information Administration, told Transport Topics. “That’s up about $10 a barrel since the middle of May, which translates into about 24 or 25 cents a gallon retail, once it’s completely passed through.”

Crude oil futures have more than doubled on the New York Mercantile Exchange in less than 16 weeks, rising to $68.58 a barrel on June 1 from a closing price of $33.98 on Feb. 12.

One fleet executive said last year’s spike in fuel prices nearly wrecked his company and he feared current rising costs could foreshadow another out-of-control spiral.

“Yes, we’re very concerned about this upward trend in diesel, be-cause last year’s surge, combined with a 25% drop in freight, nearly knocked us out of business,” Doug Ross, president of Spokane Transfer and Storage Co., a less-than-truckload carrier based in Spokane, Wash., told TT.

Retail diesel rose from $3.376 a gallon on Jan. 7, 2008, to its all-time high of $4.764 on July 14. The price of diesel, along with other fuels, plunged sharply when the recession hit in early autumn.

“The drop in fuel prices from last year’s highs was one of the main reasons we were able to stay in operation, but we don’t know what will happen, with our freight still down, if diesel prices start acting like last year,” Ross said.

Ross’ company operates 40 tractors and about 90 trailers, carrying mostly building materials in Washington and Idaho.

Despite the recent increases, diesel was still selling for $2.355 less per gallon than it did a year ago, and gasoline sold for $1.453 under year-ago levels.

That is one reason why another trucking executive was less concerned about the current fuel environment.

“The diesel increases haven’t stung us yet,” Pete Zarayko, transportation coordinator for Horwith Trucks Inc., Northhampton, Pa., told TT.

“We just adjust the fuel surcharges, adding about 1% for every 10-cent increase in the rack price, to take care of these increases,” Zarayko said.

He said the price hasn’t moved enough for the company to plan for anything like year’s price gyrations.

Horwith Trucking runs about 90 tractors, 10 of them with owner-operators, and 300 trailers of all types, concentrating on removing hazardous cargos cleaned up from environmental sites in the Northeast and portions of the Midwest.

Phil Flynn, energy analyst at Alaron Research, said crude oil was rising because of expectations that the economy was getting better.

“Diesel and gasoline retail prices are, obviously, following along with the rest of the market, whether it’s crude oil or natural gas,” Flynn told TT. “Some think diesel is rising because the economy is getting better, while others think diesel is increasing because of inflationary implications of what is going on in government spending, but I think it’s a question of both playing into diesel’s rise.”

EIA’s MacIntyre said that gasoline prices were rising faster because gasoline demand was increasing, as is usual in the summer driving season, while demand for diesel was lower than normal because of weak freight demand for trucking.

He added that another reason was that stocks of distillates, from which diesel is made, are higher than usual for this time of year.

The U.S. stock of distillates stood at 148.4 million barrels on May 22, the last date for which EIA had data, up from 109.4 million barrels on May 23 of last year.