Diesel Price Up for 10th Week, While Gasoline Drops to $2.849

This story appears in the May 3 print edition of Transport Topics.

The U.S. average price of diesel inched higher last week, rising 0.4 cent to $3.078 a gallon and keeping trucking’s primary fuel at over $3 a gallon for the fourth week in a row, the Energy Department reported.

Last week’s price, reported April 26, was the highest for diesel since Nov. 3, 2008, when the average gallon cost $3.088, DOE reports show.

While diesel prices continued to climb, the U.S. average price of gasoline last week fell by 1.1 cents — from $2.86 a gallon on April 19 to $2.849 last week — widening the spread between diesel and gasoline prices to 22.9 cents a gallon from 21.1 cents the previous week.

A year ago, the average price of diesel was $2.201 a gallon, and gasoline averaged $2.049 a gallon.

With diesel prices on an upswing that began 10 weeks ago, trucking executives said they rely on fuel surcharges to protect themselves. However, surcharges were only partially effective.

“There’s always a lag” when fuel prices go up, said Michael Burton, president of C&K Trucking Inc., an intermodal fleet operator with more than 500 trucks and headquarters in Chicago.

Shippers, Burton said, are “always slow to increase and quick to decrease” rates when fuel prices are moving up and down.

At McFarland Truck Lines Inc., in Austin, Minn., President Geoff Baker said that mandates for such things as lower-sulfur fuel and new engine specifications have made fuel management a fact of life.

“Any good fleet is constantly looking at fuel accounting without regard to what’s the price of fuel,” Baker said.

He and his parents own McFarland, a fleet of 100 trucks hauling refrigerated foodstuffs.

To compete in a world where high diesel prices are the norm, Burton of C&K Trucking said he relies on SmartWay, the U.S. Environmental Protection Agency’s program to help fleets cut greenhouse gas emissions along with fuel costs.

“We really modeled through their whole program,” Burton said.

With the help of EPA’s SmartWay grants, his firm retrofitted its older truck engines to cut greenhouse gas emissions and fuel costs. Using SmartWay guidelines, Burton said that the firm has improved fuel mileage to 6 miles per gallon from 5.5 mpg.

In Minnesota, where on some “shockingly” cold winter nights trucks have to be running even when parked, Baker said he also relies on SmartWay recommendations.

“We continue to lower our fleet speed. We did that a couple years ago,” he said. His top speed on engine governors is down from 68 to 65.

“We’ve installed auxiliary power units on all of our trucks, and you continue to spec aerodynamic equipment to reduce your aerodynamic drag,” he said.

The firm bought 2009 model trucks but is reluctant to buy the new 2010 engine models.

“The diesel exhaust fluid technology, after we’ve looked at it, I’d [rather] have somebody else be the test pilot for that stuff,” Baker said.

The new engines on most 2010 large trucks use a selective catalytic reduction technology that requires a urea additive to remove nitrogen oxides. Manufacturers say it improves fuel efficiency over preceding models.

The diesel-gasoline gap in price last week was the biggest since Feb. 9, 2009, when the price differential was 29.3 cents and diesel was selling on average for $2.219 a gallon and gasoline for $1.926.

However, that spread is no longer indicative of much, said Doug MacIntyre, a senior energy market analyst at the DOE’s Energy Information Administration.

Years ago, truckers could expect diesel to be less expensive than gasoline in summer, when automobile driving rises, and could expect diesel to be on top in the winter when diesel competes with heating oil, he said.

But that’s no longer the case because global diesel demand has risen significantly.

China and India, for example, run manufacturing plants with diesel, while U.S. plants use natural gas, MacIntyre said.

According to the EIA, on April 23 there were 152 million barrels of distillate on hand, while at the start of the month, on April 2, there were only 146 million barrels. Diesel and heating oil come from the distillate portion of the crude oil barrel that remains after gasoline is refined.

Expectations that the economy will suddenly take off are keeping crude prices over $80 a barrel, Flynn said.

Crude on the New York Mercantile Exchange closed April 29 at $85.17 a barrel. Last week, on April 22, it closed at $83.70. A year ago, on April 29, crude closed at $50.97.

“If you look at the situation, you would think that this is a price that’s ready to collapse. But it hasn’t. It has been resilient,” Flynn said.