Diesel Price Dips 1.2¢ to $3.937; Crude Oil Plunges Below $87 a Barrel

The national average price of retail diesel dipped 1.2 cents a gallon to $3.937 last week, the fifth time in nine weeks it has declined, the Department of Energy reported.

Since the end of May the diesel average has fluctuated between $3.85 and $3.954 a gallon. A year ago, it stood at $2.928, DOE reported after its Aug. 1 survey of fueling stations.

DOE also reported that the regular gasoline average rose by 1.2 cents a gallon to $3.711 — the fifth straight weekly increase. The cumulative increase for five weeks is 13.7 cents a gallon. A year ago the average stood at $2.735.

“These prices are definitely affecting us negatively,” said Mark Gibson, president of Siskiyou Transportation, an Ashland, Ore., log-hauling carrier, commenting on the year-over-year price differential.

“The irony is that this has been a better year for the amount of work we have in the timber industry, but fuel is reducing our bottom line,” Gibson said.

Crude oil futures contracts de-clined notably, by nearly $13 a barrel in just seven trading days from nearly $100 in late July to $86.63 on Aug. 4, the lowest closing price since Feb. 18. Bloomberg News attributed the decline to fears about economic performance.

The recent stability at the pump makes fuel surcharge collection more effective, but the increase over 12 months demonstrates the necessity to have a surcharge program, said Robert Ragan, chief financial officer of flatbed carrier Melton Truck Lines, Tulsa, Okla.

“We need support from the shipping community on surcharges. We need an even net cost on fuel, or it’s a cost we can’t bear,” said Ragan, adding that Melton spends about $200,000 a day on diesel to propel its fleet of more than 850 tractors.

“In exchange for the surcharges, though, we’re expected to conserve fuel as much as possible, to counsel drivers and invest in technology to minimize usage,” Ragan said.

Gibson said that, with a fleet of 10 power units, it is difficult to maintain surcharges. While business might be better than a year ago, he said, the timber industry is still struggling by historical standards.

Meanwhile, on Aug. 3, DOE’s Energy Information Administration reported domestic petroleum stocks at fairly high levels, as of July 29. Ultra-low-sulfur distillates were unchanged at 104.2 million barrels and crude oil crept up to 355 million barrels from 354 million barrels the week before.

A potentially significant discrepancy is the stability of heating oil futures contracts, relative to the fall in crude oil, said Brad Simons, president of the Pathway Network of Simons Petroleum, Oklahoma City. Simons said the two contracts generally move in the same direction, but through Aug. 3, there appeared to be a gap opening.

“Crude has really come off its earlier prices, but heating oil has moved sideways. It’s higher than it should be, and we always track the comparison between the two,” said Simons, whose firm provides petroleum services for trucking companies.

Home heating oil and diesel fuel are chemically similar, and both are considered “middle distillates.”

If the normal relationship between crude oil and heating oil re-establishes itself, Simons said, “diesel prices could come down without crude oil moving at all.”

Bloomberg reported concern among oil traders about the future of the economy.

“The main driver is the economy,” Sean Brodrick, a natural resource analyst with Weiss Research. “If the U.S. economy is slowing, the easiest path for oil is lower. We’ll soon be testing support just below $90.”

“We’ve had four months of poor economic headlines,” Stephen Schork, a consultant in Villanova, Pa., told Bloomberg. “The revision of the first-quarter GDP . . . to just 0.4% shows that there is basically no growth. The specter of a double-dip recession is growing.”

During the first half of this year, U.S. gross domestic product has grown at an annual rate of only 0.8%.