Diesel Price Dips 1.6¢ to $4.707 a Gallon
Gasoline Climbs 3.9¢ on Summer Demand
By Rip Watson, Senior Reporter
This story appears in the June 9 print edition of Transport Topics.
The U.S. average diesel price took a break last week from its dizzying climb, dipping 1.6 cents a gallon to $4.707, the Department of Energy reported.
Prior to last week’s decline, diesel had increased 58 cents in just four weeks. Commercial trucking’s main fuel has risen 68% since the comparable week of last year, when fleets were paying an average of $2.799 a gallon.
“We are getting some breathing room,” said Greg Carman, president of truckload carrier Carman Inc. of Fort Smith, Ark., who said his local prices dropped as much as 10 cents a gallon in a week, providing a little relief.
DOE also said the gasoline average rose for the 10th consecutive week, climbing 3.9 cents a gallon to a record $3.976. It is 81.9 cents higher than a year earlier.
Gasoline rose while diesel de-clined because the markets respond to different factors, said Laurie Falter, an analyst with DOE’s Energy Information Administration.
Falter said gasoline increases were the result of rising demand during the summer vacation season, while the drop in diesel prices was due to reduced U.S. demand because of recent price hikes for that fuel.
At current price levels, fleets are spending a total of $3.5 billion a week for diesel and $1.1 billion a week for gasoline, based on American Trucking Associations fuel consumption data.
An analyst said he believes relief could be in sight for fleets because of recent crude oil price declines. For now, however, diesel and crude prices remain about 40% higher than they were at the beginning of 2008. That climb continues to send shock waves through the U.S. economy, including General Motors Corp.’s decision last week to shut four truck-building plants.
The increases are forcing carriers and shippers to make more adjustments.
“I’ve been in the industry 35 years, and I’ve never seen anyone look at fuel economy the way we do these days,” said Joe Egan, director of maintenance for refrigerated carrier ABCO Transportation of Dade City, Fla. “With the cost of fuel today, you have to look at every avenue you can and do all the monitoring you can.”
“A big part of it is driver training — getting them to use cruise control more often,” said Egan. ABCO cut the maximum speed to 65 miles per hour from 68, lowered the top speed for ninth gear to 58 miles per hour to encourage drivers to use the more efficient 10th gear and cut idling times.
Eric Morley, director of logistics for Best Buy, said the biggest U.S. electronics retailer responded to fuel price hikes by reducing the number of weekly store deliveries and loading freight for more stores onto the same trailer wherever possible.
Delivery patterns have changed for about 20% of Best Buy’s 922 stores because of fuel-related costs, he said.
“More than anything at all, the rise in the price of diesel has brought the subject to the forefront with people who aren’t involved with logistics,” Morley said. “Now when we tell people at our stores that we are thinking about changing delivery frequencies, they totally get it.”
The price of crude for July delivery in New York dropped even further last week to $127.79 on June 5, a decline of 4% from the record closing price of $133.17 on May 21.
The oil and fuel prices declines coincided with Federal Reserve Chairman Ben Bernanke’s June 3 statement that policymakers will end interest rate cuts and shore up the weak dollar.
“The Fed finally acknowledged that one of the major reasons that oil prices have been so high is the decline of the dollar,” said Phil Flynn, an analyst for Alaron Trading Co., who believes diesel prices could drop as much as 75 cents a gallon solely because the Fed wants a stronger dollar. “Speculators and hedgers had little choice other than to buy commodities if they wanted to make money.”
“There could be a substantial drop in diesel prices,” Flynn said, if there aren’t major disruptions such as refinery outages, adding that “diesel still wouldn’t be cheap at $3.75 a gallon.”
ATA Chief Economist Bob Costello cautioned that “the dollar needs a prolonged and significant strengthening in order for us to see a longer and larger decrease in oil prices.”
While the Fed tried to prop up the dollar, the Commodity Futures Trading Commission said it would try to dampen speculation by continuing a fuel price probe to scrutinize international and domestic oil trading practices.
ATA President Bill Graves praised CFTC’s efforts in a letter to the agency, saying ATA has repeatedly asked the government to address speculation, because limiting that step could help to burst a price bubble in those markets.
This story appears in the June 9 print edition of Transport Topics.
The U.S. average diesel price took a break last week from its dizzying climb, dipping 1.6 cents a gallon to $4.707, the Department of Energy reported.
Prior to last week’s decline, diesel had increased 58 cents in just four weeks. Commercial trucking’s main fuel has risen 68% since the comparable week of last year, when fleets were paying an average of $2.799 a gallon.
“We are getting some breathing room,” said Greg Carman, president of truckload carrier Carman Inc. of Fort Smith, Ark., who said his local prices dropped as much as 10 cents a gallon in a week, providing a little relief.
DOE also said the gasoline average rose for the 10th consecutive week, climbing 3.9 cents a gallon to a record $3.976. It is 81.9 cents higher than a year earlier.
Gasoline rose while diesel de-clined because the markets respond to different factors, said Laurie Falter, an analyst with DOE’s Energy Information Administration.
Falter said gasoline increases were the result of rising demand during the summer vacation season, while the drop in diesel prices was due to reduced U.S. demand because of recent price hikes for that fuel.
At current price levels, fleets are spending a total of $3.5 billion a week for diesel and $1.1 billion a week for gasoline, based on American Trucking Associations fuel consumption data.
An analyst said he believes relief could be in sight for fleets because of recent crude oil price declines. For now, however, diesel and crude prices remain about 40% higher than they were at the beginning of 2008. That climb continues to send shock waves through the U.S. economy, including General Motors Corp.’s decision last week to shut four truck-building plants.
The increases are forcing carriers and shippers to make more adjustments.
“I’ve been in the industry 35 years, and I’ve never seen anyone look at fuel economy the way we do these days,” said Joe Egan, director of maintenance for refrigerated carrier ABCO Transportation of Dade City, Fla. “With the cost of fuel today, you have to look at every avenue you can and do all the monitoring you can.”
“A big part of it is driver training — getting them to use cruise control more often,” said Egan. ABCO cut the maximum speed to 65 miles per hour from 68, lowered the top speed for ninth gear to 58 miles per hour to encourage drivers to use the more efficient 10th gear and cut idling times.
Eric Morley, director of logistics for Best Buy, said the biggest U.S. electronics retailer responded to fuel price hikes by reducing the number of weekly store deliveries and loading freight for more stores onto the same trailer wherever possible.
Delivery patterns have changed for about 20% of Best Buy’s 922 stores because of fuel-related costs, he said.
“More than anything at all, the rise in the price of diesel has brought the subject to the forefront with people who aren’t involved with logistics,” Morley said. “Now when we tell people at our stores that we are thinking about changing delivery frequencies, they totally get it.”
The price of crude for July delivery in New York dropped even further last week to $127.79 on June 5, a decline of 4% from the record closing price of $133.17 on May 21.
The oil and fuel prices declines coincided with Federal Reserve Chairman Ben Bernanke’s June 3 statement that policymakers will end interest rate cuts and shore up the weak dollar.
“The Fed finally acknowledged that one of the major reasons that oil prices have been so high is the decline of the dollar,” said Phil Flynn, an analyst for Alaron Trading Co., who believes diesel prices could drop as much as 75 cents a gallon solely because the Fed wants a stronger dollar. “Speculators and hedgers had little choice other than to buy commodities if they wanted to make money.”
“There could be a substantial drop in diesel prices,” Flynn said, if there aren’t major disruptions such as refinery outages, adding that “diesel still wouldn’t be cheap at $3.75 a gallon.”
ATA Chief Economist Bob Costello cautioned that “the dollar needs a prolonged and significant strengthening in order for us to see a longer and larger decrease in oil prices.”
While the Fed tried to prop up the dollar, the Commodity Futures Trading Commission said it would try to dampen speculation by continuing a fuel price probe to scrutinize international and domestic oil trading practices.
ATA President Bill Graves praised CFTC’s efforts in a letter to the agency, saying ATA has repeatedly asked the government to address speculation, because limiting that step could help to burst a price bubble in those markets.
