Diesel Price Falls 4.2¢ to $3.656; Gas Lowest Since January 2011

This story appears in the Oct. 27 print edition of Transport Topics.

The U.S. diesel average fell 4.2 cents a gallon to $3.656 last week, its biggest decline in a year and a half, the Department of Energy reported Oct. 20.

Trucking’s main fuel is now at its lowest level since it was $3.648 on July 2, 2012, and last week’s decline left it 23 cents less than the $3.886 of the comparable week last year, DOE said after its Oct. 20 survey of fueling stations.

Diesel has dropped more than 26 cents since it hit $3.92 on June 30, and more than 36 cents since its 2014 high of $4.021 on March 10. Last week’s decline was the biggest since it fell 5.5 cents on April 22, 2013.

The retail gasoline average continued its sharp string of downturns, falling 8.7 cents to $3.12 a gallon, its third straight decline, in which time it has fallen 23.4 cents.

Gas, which is 24 cents less than it was a year ago when it was $3.36, has fallen almost 60 cents since it was $3.713 on April 28. It now is at its lowest level since Jan. 31, 2011.

DOE’s Gulf Coast regional price fell to $2.912 — the first time since last November that a regional gasoline price was below $3 a gallon.

The continuing slides came as crude futures fell to $80.52 a barrel on the New York Mercantile Exchange on Oct. 22, the lowest Nymex closing price since June 28, 2012.

Diesel stocks are in pretty good shape,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “The biggest concerns going forward are refinery capacity,” as refineries are slowing their output due to seasonal maintenance transitioning to winter fuel blends, he told Transport Topics.

Although continued low oil prices “could lead to a further 6- to 8-cent drop” at the pump, “there is a lot of demand for diesel right now, [and] the price could go up” heading into the winter, when diesel competes with heating oil for distillate stocks, Schork said.

One Salt Lake City-based trucking executive said that despite the overall downward price trend, local refinery issues have resulted in higher diesel prices this month in his area.

“The big thing that’s affecting us right now is there’s a refinery down here in Utah, which has actually been driving prices higher,” said Rob Thimm, Pride Transport’s controller and fuel director.

“Demand is high and supplies are low,” he said, adding that another regional refinery has cut capacity by about half for maintenance.

The Rocky Mountain region, which includes Utah, posted the nation’s smallest diesel decline last week, falling just 1.2 cents to $3.738 a gallon, DOE said.

Pride Transport, a nationwide truckload carrier with 450 trucks, buys about 50,000 gallons a week for a fueling station outside its home terminal, some of which it sells to other fleets.

“We keep our trucks pretty new — our oldest truck is about 2½ years old — and we are getting skirts on all of our trucks and are starting to test ‘scoops’ underneath some trailers” to boost fuel economy, Thimm said.

DOE said in a separate report that oil inventories jumped by almost 9 million barrels for the week ended Oct. 17. That was more than twice the gain forecast by analysts, Bloomberg News reported.

Oil prices fell after that Oct. 22 report, which also said that distillate supplies, including diesel, declined by 1.4 million barrels, while gasoline stockpiles fell 4 million barrels for the week ended Oct. 17.

Refineries’ capacity declined 1.2%, and the 86.7% refinery utilization rate was the lowest since March.

Schork said that, with a late fall harvest season and the year-end holidays approaching, coupled with strong intermodal demand, diesel’s pump price could move higher toward the end of the year.

“The old lament is retail [fuel] prices never come down commensurate with crude oil prices,” he said. “But the opposite end of that is that retail prices never go quite as high when oil prices spike.”