Diesel Price Dips 1.6¢ to $2.185

This story appears in the May 11 print edition of Transport Topics.

The average price of retail diesel in the United States slipped another 1.6 cents last week to $2.185 a gallon, the Department of Energy reported, even as crude oil hit a five-month high.

The average has now declined 4.4 cents over the past three weeks, DOE said after its May 4 survey of fueling stations.

Meanwhile, the average price of gasoline average rose 2.9 cents to $2.078 a gallon, wiping out two weeks of dips, DOE’s Energy Information Administration said. The average price of gasoline is now $1.535 a gallon cheaper than it was a year ago.

The rising price of oil “hasn’t had as strong an effect on diesel fuel,” said Tancred Lidderdale, an EIA analyst. He said diesel sales, which are usually driven by demand for trucking services, have languished. However, gasoline demand has inched up, buoyed by “tax incentives, tax cuts and rebates” for U.S. consumers.

Diesel and gas have now declined $2.579 and $2.036 a gallon, respectively, from the record levels they reached in July.

Though the fuel-pricing pressures of last year have given way to more pressing concerns about a lack of freight, carriers indicated they intend to continue most fuel conservation initiatives.

Saving fuel “is habit, at this point,” said David Kizzier, research and development coordinator for Barr-Nunn Transportation, Granger, Iowa. For example, “We’re in the process of turning [speed limits on] the tractors down from 65 mph to 62 mph.”

However, Barr-Nunn has elected to put plans for a fleetwide rollout of auxiliary power units on hold.

“The payback period for the APUs is still larger than we would like — a couple of years,” Kizzier said. “With the price of fuel going down, it takes even longer to pay for them.”

Barr-Nunn runs about 500 trucks, primarily in the eastern United States.

In its latest quarterly earnings report, Werner Enterprises, Omaha, Neb., said it plans to continue “reducing truck idle time, lowering nonbillable miles, increasing the percentage of aerodynamic, more fuel-efficient trucks in the company truck fleet and the installation of auxiliary power units in company trucks.”

Even after accounting for an overall drop in miles traveled in the quarter, Werner said its fuel-saving initiatives reduced purchases in the most recent quarter by 2 million gallons, compared with the year-ago quarter.

At the average national price last week, that saving equates to a $4.4 million reduction in the company’s quarterly fuel bill.

Refrigerated goods hauler Frozen Food Express Industries likewise held the line with its own fuel conservation initiatives, including “managing speed levels and equipping its tractor fleet with aerodynamic products,” the company said in its first-quarter earnings report.

Frozen Food said the initiatives have improved the fuel efficiency of its tractor fleet to 6.09 miles per gallon from 5.89 mpg in the 2008 first quarter.

The improvement means the total miles driven by Frozen Food’s flagship truckload division cost about $13.4 million in the first quarter — $500,000 less than the same number of miles would have cost the carrier at the old mileage rate of 5.89 mpg, according to company figures.

On May 7, crude oil closed at $56.71 on the New York Mercantile Exchange, the highest close since Nov. 14. Oil rose for much of last week after Federal Reserve Chairman Ben Bernanke offered a cautiously optimistic assessment of the  U.S. economy and housing market.

He told Congress that the Fed expects “economic activity to bottom out, then to turn up later this year.”

A year ago, a barrel of crude oil was trading at about $120 a barrel, almost $65 more than the price last week. However, oil prices have risen about 18% since the beginning of the year.

Also last week, EIA said demand for distillate fuels — including diesel — continued to drop much faster than the rate at which U.S. refineries were producing such fuel.

EIA’s latest weekly survey shows that while year-over-year distillate demand, measured as product supplied, fell 18% to 3.5 million barrels a day, production declined just 1% to 4.21 million barrels a day in the week ended May 1.

Stocks of crude oil, meanwhile, hit their highest level since 1990, rising to 375.3 million barrels — a year-over-year gain of 49.7 million barrels, and an increase of 605,000 barrels compared with the prior week.