Diesel Price Drops 3.5¢ to $3.698; Gas Plunges as Oil Hits 2-Year Low

This story appears in the Oct. 20 print edition of Transport Topics.

The U.S. diesel average fell 3.5 cents to $3.698 a gallon last week, the Department of Energy reported, while oil prices plunged to the lowest level in more than two years.

Trucking’s main fuel has dropped for five straight weeks, has not risen in almost four months and has slid more than 32 cents since its year-high $4.021 in March.

Last week’s price — the lowest since it was $3.695 on July 16, 2012 — was 18.8 cents below a year earlier, DOE said Oct. 14 after its weekly survey of filling stations.

The retail regular-gasoline average posted an even sharper drop, falling 9.2 cents to $3.207 — its lowest price since last November and the biggest single-week decline since December 2012.

The downturn left gas 14.7 cents below a year ago, and with the exception of Nov. 11, 2013, was the lowest since it was $3.189 on Feb. 21, 2011.

The pump-price declines came as U.S.-traded crude oil futures fell to $81.78 per barrel on the New York Mercantile Exchange Oct. 15, the lowest Nymex settlement price since June 2012.

“I think that’s definitely the major factor behind lower diesel, and gasoline prices as well,” said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.

“One thing that’s contributed to the slide in [diesel prices] is a delay in refineries’ fall maintenance programs. We thought we would see it in the middle of September, but it didn’t start ‘til last week,” McGillian said Oct. 15.

One trucking executive said he continues to seek ways to reduce his company’s fuel expenses.

“Every penny a guy can save in this business definitely helps,” said Tony Lacy, chief operating officer of Nebraska Transit Co., based in Gering, Nebraska. “Everybody wins, because we pass along the savings to our customers in lower fuel surcharges.”

The regional less-than-truckload fleet’s fuel economy has improved a half-mpg this year, to 6.07 mpg, in part by putting skirts on its trailers and buying new trucks, including models with automated transmissions, he said.

NTC, which uses company drivers, has 12 terminals among Denver, Tulsa, Oklahoma, and Chicago, and 135 power units, including 20 straight trucks.

“We look at the fuel mileage on the new trucks every week, to make sure they are increasing as they get broken in,” Lacy said.

“If we see a truck that’s not getting the mileage we think it should, we get it in the shop and make sure it’s not a maintenance issue,” he said. “We go through a driver evaluation process, where we look at over-revs and hard brakes and speeds . . . [and] educate our drivers on what they can do to save fuel.”

Meanwhile, the International Energy Agency cut its forecast for oil demand in 2014 by 250,000 barrels a day to 650,000 on projections of lower world economic growth.

The agency said demand growth will “tentatively” increase to 1.1 million bbd in 2015 “as the macroeconomic backdrop improves.”

Globally traded Brent crude oil, which generally trades higher than Nymex futures, fell to near a four-year low last week, to $83.75 a barrel.

IEA also said less oil will be needed from OPEC countries, which produce about 40% of global supplies.

“OPEC — instead of taking their usual stance to cut production to boost prices — wants to maintain market share and are basically not setting the base price at $100” a barrel, McGillian said. “That drop has spilled over into both [diesel and gasoline] fuel-product markets.”

The cartel pumped 30.9 million bbd in September, the most in a year, with key producers Saudi Arabia, and Iran offering discounts, according to Bloomberg News,

OPEC said seasonal demand for heating oil, which is generally a key factor affecting winter U.S. diesel prices, was likely to decline this year.

“Looking ahead to the winter season, the oil product market is usually supported by heating-fuel demand, making it sensitive to weather developments,” the report said. “Official forecasts expect heating degree days in the U.S. to be 12% lower than last winter, implying lower demand for heating fuels.”