Diesel Price Dips 1¢ to $3.88
This story appears in the June 3 print edition of Transport Topics.
The average price of a gallon of U.S. retail diesel dipped 1 cent to $3.88 last week, continuing a lengthy run of relative stability, the U.S. Department of Energy reported.
That was the first decline after two weeks of modest increases and left prices just 0.7 cent below the U.S. agency’s April 22 average. Diesel also is 1.7 cents below the comparable 2012 week.
Gasoline prices declined 2.8 cents to $3.645 per gallon, the May 28 DOE report said. Gas is 2.5 cents below year-ago levels. Meanwhile, crude oil futures traded on the New York Mercantile Exchange settled at $93.61 per barrel May 30, a one-week drop of just 67 cents.
“We have reached the new normal,” said Carl Larry, president of Oil Outlooks & Opinions, a New York-based consulting firm. “Some people have predicted fuel prices will be coming down, but I think we are going to see the prices stay where they are for now.”
To demonstrate his point about stability, Larry said that the price of West Texas Intermediate crude oil has varied just $15 per barrel since June 2012. By comparison, WTI crude prices fluctuated over a $34-per-barrel range from June 2011 to June 2012 and $42 per barrel from June 2010 to June 2011.
Tim Evans, an energy futures specialist for Citifutures, New York, agreed with Larry, saying he expects diesel and other energy prices will remain stable for the foreseeable future.
He noted that worldwide demand for diesel has remained soft, in large part because of the dropoff in the European economy, and is expected to remain that way.
However, with an even greater decline in gasoline demand, refiners have switched to higher-margin diesel to keep their facilities running profitably, Evans said.
“They are in no position to give away diesel at home” as long as other fuel markets are weak, Evans told Transport Topics.
Larry said he believes crude prices will rise gradually over the longer term, because there hasn’t been any time when the U.S. economy has grown and prices of diesel and gas have declined overall.
Larry did offer some hope that prices may drop 5 to 10 cents per gallon over the next four to six weeks because there is an ample supply of crude oil.
A gradual price change helps truckers, he noted, because their fuel surcharges do not change much in that situation, making an increase easier for customers to accept.
Tom Voelkel, president of Dupre Logistics, Lafayette, La., told TT that in the current slow economy, fleets have to pay attention to every aspect of their business, particularly fuel costs.
“This is forcing us to look at our fuel surcharges to make sure they are compensatory,” Voelkel said. “The large majority of them are, but we have to deal with the outliers.”
Voelkel added, “If your second-biggest cost [fuel] goes out of whack, that throws everything else out of whack.”
Said Greg Finzen, director of recruiting for Hirschbach Motor Lines, South Sioux City, Neb.: “We are certainly not happy about diesel prices. We have tried to be proactive in dealing with short-term spikes; we don’t see fuel going down anytime soon.”
The refrigerated carrier controls prices by using new tractors with greater fuel efficiency and devices such as aerodynamics and super single tires on its trailers to reduce rolling resistance, Finzen said.
At Milton Transportation, Milton, Pa., a fuel pricing contract with TravelCenters of America helps to control diesel costs, said Bill Buckley, director of safety and personnel.
“It’s helped us very much,” said Buckley, who compared the daily changes in diesel prices with a pingpong ball.
“It seems like there is no rhyme or reason to prices,” Buckley said.
Milton’s vice president of sales, Steve Conner, illustrated that fact by saying diesel was 23 cents per gallon cheaper in New Jersey on May 30 than it was in Milton’s home state.
Conner added that the company also has moved to save by using battery-powered cab systems for auxiliary heating and air conditioning instead of burning fossil fuel and has tried to “fine tune” its pricing to counteract chronically high fuel costs.
One positive for Midwest fleets was the resumption of production at some recently idled refineries, which drove prices up in the region at a time when trucking’s main fuel was falling elsewhere.
