Diesel Price Decline Pauses
By Eric Miller and Frederick Kiel, Staff Reporters
This story appears in the Oct. 6 print edition of Transport Topics.
The average price of retail diesel fuel rose 0.1 cent last week to $3.959, following 10 straight weeks of declines, according to the De-partment of Energy.
Gasoline prices fell during DOE’s Sept. 29 weekly survey of fueling stations, declining 8.6 cents to $3.632 a gallon. It was the second straight drop for gas.
But the fuel price changes were overshadowed in a week marked by turmoil in crude oil and financial markets that sent crude below $94 a barrel by Oct. 2.
“It seems to me like just about everything is tied up in the financial situation right now,” said Bruce Gress, director of petroleum risk management for Pilot Travel Centers. “If you had to pin me down, I think we might recover a little bit, but we’re still in a bear market and we’ll eventually go down and try to test that $90-a-barrel crude oil,” he said.
The price of crude oil dropped by 9.8%, more than $10 a barrel, to $96.37 on Sept. 29, as the Dow Jones Industrial Index fell almost 778 points after the House of Representatives rejected an estimated $700 billion Wall Street rescue plan.
The crude-oil drop was the largest single-day decline since late 2001, but crude bounced back to more than $100 the following day. Crude on the New York Mercantile Exchange closed at $98.53 on Oct. 1.
The retail price of diesel, trucking’s main fuel, has dropped more than 80 cents a gallon since reaching a high of $4.764 on July 14 but remains 91 cents a gallon higher than it was during the corresponding week of last year.
“I just think we’re going to be extremely volatile until we get something worked out in this whole financial mess,” Pilot’s Gress said, “but generally, I think it’s in more of a bearish trend right now.”
Meanwhile, a survey by NATSO, which represents 1,100 truck stops and travel plazas, showed that diesel sales at truck stops in August fell 7.8% from August 2007 levels.
A bulk fuel distributor also warned truckers recently that a credit crunch could add to the fuel problems that fleets face.
“The supplier side of the bulk fuel market depends upon credit, and the timely settlement of that credit, and a lot of us are nervous,” said Roger Simons, senior executive vice president of Maxum Petroleum Holdings Inc., Old Greenwich, Conn., parent company of bulk fuel distributor Simons Petroleum Inc.
Trucking companies have been ordering full refills of their tanks, no matter the state of their business, Simons said: “We’re covering a lot more risk than we used to do, and the credit markets are degrading.”
“If one of those companies files for bankruptcy, we will have to sell and successfully collect on 200 loads of the same size, just to make the loss back,” he said at an Oil Price Information Service conference in Atlanta on Sept. 23.
“Some 1,000 trucking firms have already gone under in 2008, and all of their debt goes uncollected,” Simons said. “That is why we are looking much more closely at companies now before we send them diesel on credit.”
Simons Petroleum distributed 1.6 billion gallons of diesel fuel in 2007, he said.
The company felt most comfortable with “having long-term financial relationships with your firms,” Simons said, “but for that to continue, we now have to be able to look underneath you and understand that your long-term strength is real.”
Simons advised fleets that if they wanted cheaper fuel prices, they should consider paying for it early. “Not many fleets do,” he said.
Simons Petroleum has changed its policy on filling the bulk tanks of its customers because of the recent turmoil, he said.
“We’re trying to keep your tanks filled at their optimum rate,” he said. “We won’t bring the load early, if you don’t need it, and if the price is not right.”
